Fireblocks Faces Lawsuit Over Losing Private Keys Worth $75M
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22 June
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Fidelity-backed cryptocurrency infrastructure firm Fireblocks is facing a lawsuit from a cryptocurrency company Stakehound over losing $75 million worth of cryptocurrencies it was entrusted with, Calcalist has learned. Stakehound has reportedly entrusted the management of private keys of wallets with balance of 38 178 ETH to Fireblocks. However, the Israeli-based crypto company failed to provide the required level of security.

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Fireblocks denies any wrongdoing, claiming that the private keys were generated "by the client and stored outside the Fireblocks platform." According to the lawsuit filed at the Tel Aviv District Court, Fireblocks lost the keys due to a "human error committed by an employee." Stakehound also added that the private keys were not simply lost, since Fireblocks did not transfer the "relevant private keys" to Coincover as required and agreed upon.

Fireblocks has been using multi-party computation for storing private keys and backed them up in Coincover, a company focused on managing private keys. However, Coincover could not check if the private keys were correct over a confidentiality agreement. In order to recover the keys, a copy of it should be kept at Fireblocks.

According to Fireblocks' official statement, the company's research team cooperated with a request from Stakehound to create a set of "BLS key shares" for credentials related to an ETH 2.0 staking project back in December 2020.

"The key shares created in connection with this project were managed outside of the Fireblocks platform and were not part of its MPC production wallet structure or backup procedures," the company emphasized.

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Fireblocks says it was Stakehound's fault, as the company "did not store the backup with a third-party service provider." Moreover, Fireblocks notes that BLS key shares were not part of its MPC wallet structure. The company added that no production keys were ever affected.

Earlier in June, Fireblocks integrated, a cryptocurrency payment platform institutional network, into its Institutional Network. Eric Anziani, COO, said the integration would help the company to increase its institutional trading volume, and expand presence "at a global level."

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