Fireblocks Faces Trial For Losing $70M Worth Of ETH: Report

Fireblocks faces trial for losing $70 million worth of ETH coins as the crypto staking platform Stakehound filed the lawsuit at the Tel Aviv District court as we read more today in our latest ETH news today.

The institutional liquid staking provider Stakehound alleged that Fireblocks failed to protect its wallets and as per the accusations, more than $77 million worth of Ether was lost. The Israeli publication Calcalist reported that Stakehound filed a lawsuit against Fireblocks for losing $75 million worth of ETH and according to the prosecution, the security company was negligent and resulted in the loss of funds which cannot be restored.

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Fireblocks faces trial as Stakehould pointed out the main reason is human error. The accusation alleged that one employee from Fireblocks failed to back up the private keys of the defendant but then deleted them for no apparent reason. StakeHound stated that the sloppy handling resulted in damage and led to the loss of 38,178 coions of ETH or $70 million:

“This is not a simple situation where the private keys were simply lost. This resulted in a disaster and damage: 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.”

In turn, Fireblocks asserted that they will conduct an investigation of the situation and will assist all parties involved to resolve the issue. The security firm refused to take responsibility for the loss of the coins as their customer hadn’t compelled with the protection guidance:

“The keys were generated by the client and stored outside the Fireblocks platform. The customer did not store the backup with a third-party service provider per our guidelines.”

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Ethereum’s founder Vitalik Buterin spoke about the strong importance of developing methods that allow users to recover the private keys of their wallets in case of an emergency. This is impossible right now without the help of trusted third parties but the founder outlined that social security wallets could be a good solution to the problem. They work just as any wallet except they add guardians to the equation which facilitates access if the owners lose their keys for no reason. If a user loses the keys, the social recovery functionality will kick in and the user can then reach out to the guardians and ask them to sign a special transaction and change the pubkey registered in the wallet contract to a new one.

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Author: Stefan