Fireblocks Being Sued for Allegedly Losing Over $70M of Ether: Report

A Fireblocks employee allegedly did not protect or back up private keys to a digital wallet, which were then deleted.

Jun 22, 2021 at 11:57 a.m. UTC
Updated Sep 14, 2021 at 1:14 p.m. UTC

Crypto custody provider Fireblocks is being sued by a company claiming it lost access to more than $70 million worth of ether, according to a report by Calcalist. Fireblocks said the lost keys were stored outside its platform.

  • Crypto staking platform StakeHound filed a lawsuit against Fireblocks at the Tel Aviv District Court on the grounds of alleged negligence, Calcalist reported Tuesday.
  • A Fireblocks employee allegedly did not protect or back up the private keys to a digital wallet, which were then 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," the filing said, according to Calcalist.
  • "The defendant irrevocably lost access to the plaintiff’s digital assets, which were deposited in an e-wallet provided by the defendant, causing the loss of 38,178 of the plaintiff's ETH coins," equivalent to nearly $72 million at the time of writing.
  • In a statement on its website, Fireblocks said, "We are actively investigating the situation and assisting all parties involved to resolve the issue.”
  • Stakehound was building a Boneh-Lynn-Shacham (BLS) solution, which is not supported by Fireblocks’ multi-party computation (MPC) framework, Fireblocks said.
  • Fireblocks said it had no contractual obligation to store or back up BLS keys for Stakehound.
  • "The keys were generated by the clients and stored outside the Fireblocks platform," Fireblocks said. "No Fireblocks production keys were ever affected, all Fireblocks' customers' funds are safe, and customer keys are backed up and recoverable."
  • Fireblocks requires customers to engage the disaster-recovery services of a third-party service provider or to independently back up their keys, something it said Stakehound didn’t do.
  • Fireblocks said in its statement that it urged Stakehound "numerous times" to back up BLS keys with a third-party provider, and discovered in April that it had not done so.

UPDATE (June 23, 9:53 UTC): Adds details from statement published on Fireblocks' website.


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