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Hardware Bitcoin Wallet KeepKey Informs Users of Breach

KeepKey, a hardware wallet designed for the secure storage of bitcoin and other virtual currency, informed users on Saturday that the company’s systems had been targeted by a hacker on Christmas Day.

KeepKey founder Darin Stanchfield said the attacker activated a new phone number under his PIN-protected Verizon account and used it to hijack his email via its account recovery mechanism. The hacker then started resetting the passwords of accounts linked to the compromised email address, including the firm's Twitter account.

Stanchfield said they had managed to shut down affected email services within half an hour and began reversing the account resets from a secure email server.

In the meantime, the cybercriminal contacted the company and demanded 30 bitcoin. In return, he promised to stop the attack, destroy the data he had stolen, and inform KeepKey of the methods he used in the attack. The company decided not to give in to the extortion attempt and instead notified the FBI and provided the law enforcement agency with information on the attacker.

According to Stanchfield, KeepKey computers, servers and network were never compromised and the company does not store information on customer balances. Funds stored on the hardware wallets were never at risk.

The attacker gained access to a sales distribution channel, the services of a vendor used for shipping and logistics, and an email marketing account. He may have stolen physical addresses, emails and phone numbers, Stanchfield said.

KeepKey has collected the IP addresses, browser information, email headers and phone numbers used by the attacker, but the firm believes much of it is likely fake. Nevertheless, the firm is offering 30 bitcoin ($30,000) to anyone who can provide information leading to the attacker’s arrest.

Following the incident, KeepKey says it plans on changing its data retention policy and it has taken steps to ensure that business emails are no longer linked to third-party accounts that could contain sensitive information.

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Eduard Kovacs (@EduardKovacs) is a contributing editor at SecurityWeek. He worked as a high school IT teacher for two years before starting a career in journalism as Softpedia’s security news reporter. Eduard holds a bachelor’s degree in industrial informatics and a master’s degree in computer techniques applied in electrical engineering.