Fireblocks faces lawsuit over $72M Ether wallet damage

Crypto-custody firm Fireblocks is facing a lawsuit by a firm claiming it was locked out of its wallet containing a substantial amount of crypto assets.

Fireblocks faces lawsuit over $72M Ether wallet damage

StakeHound, a crypto staking platform, claims that Fireblocks employee’s irresponsibility resulted in the loss of millions of dollars in crypto assets without any backup available. 

Fireblocks is a crypto custody firm based in Israel, providing services for businesses and working on speeding up digital transactions.

StakeHound filed the lawsuit at the Tel Aviv District Court on June 22 claiming damages for the lost assets. The wallet in question contained 38,178 ETH, equating to more than $70 million at the time.

The court was told that an employee of Fireblock allegedly failed to protect or backup the private keys to the wallet, which were subsequently deleted preventing StakeHound from accessing its assets.

“This is a human error committed by an employee of the defendants, who worked in an unsuitable work environment, did not protect or back up the defendant's private keys needed to open the relevant digital wallet, and for no apparent reason, the keys were deleted, preventing the plaintiff's digital assets from being accessed,” StakeHound stated.

Meanwhile, Fireblocks has denied any negligence and said the private keys were generated by the client themselves and stored outside the platform, stating, “the customer did not store the backup with a third-party service provider per our guidelines.”

In a statement on its website, Fireblocks explained that it cooperated with a request from StakeHound in December 2020 to create a set of BLS key shares related to an ETH 2.0 staking project. BLS is the Boneh–Lynn–Shacham cryptographic signature scheme that allows a user to verify that a signer is authentic.

On April 29, the Fireblocks team conducted a regularly scheduled disaster recovery drill and discovered that a set of BLS key shards from the backup could not be decrypted, concluding that the customer had never backed them up.

Read: Existing Indian law could impose 2% levy on crypto bought from offshore exchange