Scammer Steals $520K in Bitcoin via Hardware Wallet. Avoid This in 5 Steps

According to blockchain security firm SlwoMist, someone recently lost 4.35 BTC (roughly $250,000 at current prices) after purchasing a preloaded hardware wallet.

The woman who fell victim to the sham purchased an imToken hardware wallet from a now-defunct shop via the JD.com marketplace.

On July 26, the victim withdrew her Bitcoin holdings to her cold wallet from the OKX cryptocurrency exchange in multiple batches.

Two days after the transfer took place, the woman found out that her balance was zero. After examining the wallet’s transfer history, she was shocked to see all of her BTC holdings being sent by a malicious actor to other addresses.

This is yet another case of a victim falling for the preloaded wallet scam that has been around for quite some time. Scammers sell activated wallets that they have access to after recording the seed phrase.

The victim, who was obviously not crypto-savvy enough, set up the compromised wallet without resetting it and generating her own seed phrase.

Five ways to avoid such a scam

In order not to fall victim to such scams, hardware wallet users should follow these five steps:

1. Always buy hardware wallets only from official brand websites, avoiding marketplaces, no matter how legitimate offers might appear.
2. Never use the seed phrase that comes with the wallet since you are supposed to generate a new one yourself.
3. Always reset (initialize) the wallet before using it.
4. Transfer small amounts of crypto before moving large sums.
5. Educate yourself about how hardware wallets actually work.