The Ethereum 2.0 staking platform. StakeHound filed a lawsuit against crypto custodian Fireblocks for losing the private keys to its wallet.
According to Stakehound, the alleged negligence of the Israel-based custodian, generated losses of 38,489 ETH equivalent to USD 75 million.
The company reported that a Fireblocks bug series caused the loss of two keys that are part of the 3 of 4 threshold signature for the shards that make up the asset retirement key.
He also alleged in court that, allegedly a Fireblocks infrastructure developer, did not protect or backup the private keys of the walletreported a local media.
The demand expresses that the error made by the employee is the product working in an ‘unsuitable environment’.
StakeHound, also reported that, in the coming weeks, there will be a public statement that will describe the next steps to take for de side of the company.
Fireblocks rejects the allegations
For its part, Fireblocks I do not hesitate to respond to claims of the Stakehound platform, through 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 a staking project for ETH 2.0.
On April 29, the Fireblocks team conducted a regularly scheduled disaster recovery drill and found that a set of BLS key shards from the backup could not be decrypted, concluding that the customer had never backed up. safety.
BLS, also known as Boneh-Lynn-Shacham, is a cryptographic signature scheme that allows the user to verify that a signer is authentic.
In that sense, the company assured that “the shared keys created in connection with this project were managed outside the Fireblocks platform and were not part of its MPC production wallet structure or backup procedures.”
According to Fireblocks, during a disaster recovery drill, certain irregularities were discovered with BLS keys, so potentially affected addresses were suspended.
While we had no contractual obligation to store part of the BLS keys, Fireblocks received the partial BLS shards as part of a one-time ETH 2.0 share project. Due to the unique nature of the project, we were unable to create the BLS key using the Fireblocks MPC system and therefore we were unable to use our production MPC system with its associated backups.
Fireblocks company statement.
Following the disaster recovery drill, the custodial company stated, which concluded that StakeHound did not back up the BLS key fragments with a third-party disaster recovery service, as recommended.
Fireblocks discovered irregularities in a set of BLS key shards in the StakeHound wallet. Source: TBIT / pixabay.com
In this sense, they discontinued the option to send ETH to that address in case the keys become unrecoverable.
Fireblocks funds are ‘safe’
Elsewhere in the document, the company highlighted that no Fireblocks production keys were affected. “All Fireblocks customer funds are safe,” and customer keys “are backed up and recoverable,” he said.
Likewise, they indicated that they are working to help stakeholders regain access to ETH and resolve the loss.
They also reported that they have a team focused on multiple solutions such as: continuous attempts to recover the keys through forensic analysis, cryptanalysis of the key generation library and in proposing a long-term ETH 2.0 solution to remedy these types of incidents in a comprehensive way.
BNY Mellon finances Fireblocks
For its part, Fireblocks has caught the attention of investors in its latest round of financing held last March. One of those was the New York Mellon Bank (BNY Mellon), the oldest in the United States, as reported by CriptoNoticias.
The investment of the financial institution corresponds to its plans to offer custody of bitcoin. BNY Mellon already has more than $ 41 billion of securities in custody.