According to Woofun AI, hardware wallet manufacturer Keystone faced a major security crisis. Failure to authenticate keys directly caused 18,835 hardware wallets to be destroyed, and the personal information of nearly 26,000 users was exposed to risk.
The roots of this security incident can be traced back to technical intrusion details disclosed on October 26, 2026. Keystone confirmed that the attackers increased access privileges through a vulnerability in a third-party data monitoring tool, thereby stealing core WebAuth keys used to verify the authenticity of the hardware. The key is permanently embedded in the device's manufacturing stage and cannot be modified or deleted through software updates. This means that attackers with this key can create counterfeit devices that pass official authenticity tests, putting unsuspecting buyers at a very high risk of asset theft. After Keystone detected unusual activity on October 20, it immediately shut down the vulnerable website functionality and initiated a forensic investigation. Due to the irrevocable nature of the keys, Keystone decided to destroy all 18,835 devices with compromised keys in its inventory, suspend processing of unshipped website orders, and instead accept pre-order orders until a new product equipped with a new authentication key is put into production.
This supply chain adjustment not only affected the current delivery pace, but also raised market concerns about the circulation of counterfeit equipment.
In addition to technical intrusions, data management flaws further exacerbated the scale of the crisis. According to data compiled by Woofun AI, after reviewing 51,083 Shopify buyer records, it was found that 25,964 records still retained sensitive personal information, including name, delivery address, contact information, and purchase history from 2024 to 2026. Keystone acknowledged a failure in its automated data deletion system, which prevented customer information from being promptly removed after the specified 180-day storage period.
Additionally, the investigation uncovered 12,873 unpaid order records, which may contain other sensitive information, and have been included in the processing plan. To address this compliance flaw, Keystone has reduced the storage period for customer information to 90 days and promised to complete processing of overdue customer data deletion requests submitted before October 24 by November 3.
Notably, the release of this incident analysis report followed the disclosure of similar customer data breaches by Boston hardware wallet manufacturer Foundation, which highlighted common challenges in the industry in data governance.
For user safety, Keystone clearly states that recovery phrases, private keys, wallet credentials, and payment information have not been disclosed, and does not recommend that customers only transfer cryptocurrencies due to this incident. For devices delivered before 20 days and authenticated, the company confirms the security; however, devices produced later using compromised keys require additional confirmation through customer support, even if verified. Keystone also warns users to be wary of fraudulent recalls requiring the return of devices, and has submitted regulatory reports in the European Union, the United Kingdom and other jurisdictions, and plans to launch security vulnerability detection tools and further audits. Article author Jamie Redman posted this report on October 26, 2026 at 4:25 p.m. (EST), when the price of Bitcoin was $79,784 (down 0.87%) and the price of Ethereum was $2,311 (down 1.62%).
This incident echoed the Electrum wallet attack that occurred during the same period. The latter covered up Bitcoin theft by raising fees and once again warned users to be wary of the risk of malicious servers replacing legitimate payments. For a manufacturer aiming to eliminate reliance on third parties, the loss of a key that guarantees the trustworthiness of the hardware poses a profound trust paradox.