2 Guesses to Recover $240m of Bitcoin & Other Crypto Horror Stories

Home » 2 Guesses to Recover $240m of Bitcoin & Other Crypto Horror Stories

Programmer Stefan Thomas earned his place in Bitcoin history the hard way: by forgetting the password to an encrypted flash drive containing his private key, and losing access to 7,002 BTC in the process. German-born Thomas was paid the sum when bitcoin was worth mere shekels in 2011, never anticipating that one day he’d be sitting on a $240 million fortune. Having vainly sought to gain access to his drive over the years, he now has two attempts left before he’s locked out forever.

Ironically, Thomas received bitcoin in exchange for making an animated video about the cryptocurrency. If anyone should have known about the importance of passwords, it’s him. Now living in California, the open-source developer is at his wit’s end trying to recover his lost treasure.

Needless to say, the press has had a field day with the story, with many readers sympathizing with the hapless Thomas. It’s easy to put yourself in his shoes: what if that time you forgot to put on your regular lottery numbers, they came up? Of course, the story was also an opportunity for Bitcoin custodians to reiterate their value. “This is exactly why you should use @Gemini Custody,” said Tyler Winklevoss, boldly straddling heartlessness and opportunism. “We do this for a living so you don’t have to worry.” Others suggested Thomas try hypnosis to remember the password.

The most helpful suggestion came from former Facebook security chief Alex Stamos, who offered to help for 10% of the windfall. “For $220M in locked-up Bitcoin, you don’t make 10 password guesses but take it to professionals to buy 20 IronKeys and spend six months finding a side-channel or uncapping,” he said. “I’ll make it happen for 10%. Call me.” Stamos later backtracked on that offer, saying he was joking and asking journalists to stop “sending people to ask me to unlock their wallets.”

Will Stefan Thomas ever get access to his riches? Who knows. If he doesn’t, those coins will be lost forever: that’s the beauty and the curse of Bitcoin. Amazingly, 20% of the current supply – worth around $140 billion – is thought to be lost, whether because the owner lost their private key, forgot a password, or died without giving wallet access to another party. Of course, Thomas isn’t alone: he’s part of a club of notorious jinxes. Here’s a potted history of the alumni.

James Howell – 7,500 BTC

Welsh IT worker James Howell entered the world of Bitcoin even earlier than Thomas, accruing a haul of 7,500 through mining in 2009. Unlike Thomas, Howell didn’t misplace his password: he put his hard drive in the bin. Thomas can probably console himself with the knowledge that someone out there feels even more foolish than him, then. Howell binned his drive in mid-2013, when his stack was worth a few hundred thousand; now it’s worth about $275 million.

Since 2014, when he realized his grave mistake, an embattled Howell has been petitioning his local council to help him scour the landfill site for the missing hard drive, likely triturated by years worth of junk. He’s even offered to pay them part of the fortune, and help people of Newport who’ve fallen on hard times. Sadly, the council hasn’t played ball, noting that “the cost of digging up the landfill, and storing and treating the waste could run into millions of pounds – without any guarantee of either finding it or it still being in working order.”

Stone Man – 8,900 BTC

“Here are the details,” began a post on the bitcointalk.org forum on August 10, 2010. There followed a ten-point summary of events that caused new user Stone Man to lose access to 8,900 bitcoin, a stack with a trifling dollar value at the time but which nonetheless had Stone Man spooked. Without getting too technical, the man had conducted an experiment to see how long it took for a transaction to clear, testing the network by sending 1 BTC to himself. Unfortunately, the change from his test transaction (8,999 BTC) was sent to an entirely new address. Because wallets were more primitive at the time, Stone Man didn’t back up the private key for the change address – and thus lost access to the coins when he switched computers. At today’s price, 8,900 BTC equals over $320 million.

QuardigaCX – $145 million

It’s not just individuals who are caught slipping when it comes to their drive password or private key. Leading Canadian cryptocurrency exchange QuardigaCX also suffered an ignominious fate after their 30-year-old CEO Gerald Cotten died in 2019. As it transpired, Cotten was the only one who had access to the platform’s cold storage and offline wallets containing $145 million, and he took the secret to the grave… Or did he? Last year, the Canadian regulator published a report showing that Cotten had been playing fast and loose with users’ crypto for years, unchecked and undetected. It led to rumors that QuardigaCX had been an exit scam, and Cotten had faked his death. Maybe Netflix should do a special on the case.

Gabriel Abed – 800 BTC

Admittedly, Barbadian entrepreneur Gabriel Abed was playing in shallower waters than Stone Man, Howell and Thomas. But 800 BTC is still 800 BTC, worth about $28 million at today’s prices. Maddeningly, Abed lost access to his precious coins when a colleague reformatted a laptop containing the private keys to his wallet in 2011. We’re guessing they’re not friends any more. Don’t feel too sorry for Abed, by the way: he got in on the ground floor and has made a healthy profit from Bitcoin in the decade since, recently purchasing a 100-acre plot of oceanfront land in Barbados for the princely sum of $25 million.

Here is another interesting article form Telegraph about Loan with Bitcoins.

If these cautionary tales tell us anything, it’s that we must all keep our crypto under lock and key. Store your password and private key safely offline, and whatever you do, be sure to make a backup.

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