Bank executive suffers theft of billion-dollar ETH haul acquired in 2015
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In a stark reminder of the importance of secure cryptocurrency storage, Estonian entrepreneur Rein Lohmus has revealed that he has lost access to a wallet containing 250,000 Ethereum (ETH), purchased for $75,000 during the Ethereum Initial Coin Offering (ICO) in 2015.
At the time of purchase, the price of Ethereum was $0.30, making Lohmus' current holdings worth over $1.16 billion, given the current exchange rate of Ethereum exceeding $4,600.
Lohmus, who is a co-founder of one of the largest private banks in Estonia, LHV Bank, has discussed his Ethereum purchase in public speeches. However, the loss of access to the wallet occurred at an unknown date after the Ethereum ICO in 2015.
Back in 2015, hardware wallets were not yet widespread, and secure storage of cryptocurrencies was not a common concern. Today, the best practice for securing cryptocurrencies is to use hardware wallets (cold storage) combined with careful, redundant offline backup of seed phrases.
Hardware wallets keep private keys offline in secure chips, making theft by hackers or malware nearly impossible. Transactions are signed inside the device without exposing keys to internet-connected computers. Seed phrases, the recovery phrase for your wallet, must be written down carefully and stored in multiple secure, offline locations to prevent loss.
Adding a passphrase (an additional 25th word) on top of the seed phrase enhances security, but losing this passphrase means total loss of access—there is no recovery. This detail echoes the kind of irreversible loss Lohmus suffered when he lost access to his Ethereum wallet.
Avoiding solely hot wallets (online or software wallets) for large sums is also advised, as they are more vulnerable to hacks. User education on private key security and wallet choice is critical; wallets should be chosen based on security features and usability.
The Rein Lohmus case underscores that loss of seed phrases or passwords leads to permanent loss of assets, as blockchain systems are decentralized and cannot restore lost keys. Therefore, multiple offline backups of seed phrases in secure, geographically separated locations and using hardware wallets are the most effective ways to prevent loss of access.
Lohmus admitted in 2023 that he had not saved the private key to the wallet containing 250,000 ETH and could not restore access to the funds. His case underscores the importance of secure storage and backup of cryptocurrencies, a lesson that dates back to Ethereum's launch in 2015.
The Ethereum ICO was a significant event in the history of cryptocurrency, and Lohmus' interest in cryptocurrencies dates back to the early 2010s. As we move forward, securing cryptocurrencies revolves around hardware cold storage, multiple offline seed backups, careful passphrase management, and user education to guard against both hacking and accidental loss. This approach balances high security with the irreversibility of blockchain access loss from lost credentials.
Technology plays a crucial role in the secure storage of cryptocurrencies, as seen in the case of Rein Lohmus who lost access to a wallet containing 250,000 Ethereum. Today, hardware wallets are recommended for securing cryptocurrencies, offering a much more secure method of storage compared to using solely hot wallets.
