Fireblocks faces lawsuit over deleted keys to $72M Ether wallet

June 23, 2021 Coin Telegraph

Fireblocks faces lawsuit over deleted keys to M Ether wallet

The crypto-custody firm claims that it was the client’s responsibility to back up the private keys.

Crypto-custody firm Fireblocks is facing legal action by a firm that claims it was locked out of its wallet containing a substantial amount in crypto assets.

Crypto staking platform StakeHound claims that negligence by a Fireblocks employee resulted in tens of millions of dollars worth of crypto assets being lost without any backup available. Fireblocks is an Israeli-based company that provides custody services for businesses and which is working on speeding up digital transactions.

StakeHound filed the lawsuit at the Tel Aviv District Court on June 22 claiming damages for the lost assets. The wallet in question contained 38,178 ETH, equating to more than $72 million at the time.

The court was told that a Fireblocks employee allegedly failed to protect or backup the private keys to the wallet, which were subsequently deleted preventing StakeHound from accessing its assets. In a statement, StakeHound claimed:

“This is a human error committed by an employee of the defendants, who worked in an unsuitable work environment, did not protect or back up the defendant's private keys needed to open the relevant digital wallet, and for no apparent reason, the keys were deleted, preventing the plaintiff's digital assets from being accessed,”

According to a report in the Israeli media, the company entrusted with backing up the private keys, Coincover, reportedly received the keys but could not check if they could open the wallet due to a confidentiality agreement.

Fireblocks has denied any negligence and said the private keys were generated by the client and stored outside the platform, adding that “the customer did not store the backup with a third-party service provider per our guidelines.”

In a statement on its website, Fireblocks further explained that it cooperated with a request from StakeHound in December 2020 to create a set of “BLS key shares” related to an ETH 2.0 staking project. BLS is the Boneh–Lynn–Shacham cryptographic signature scheme that allows a user to verify that a signer is authentic.

On April 29, the Fireblocks team conducted a regularly scheduled disaster recovery drill and discovered that a set of BLS key shards from the backup could not be decrypted, concluding that the customer had never backed them up.

“No Fireblocks production keys were ever affected, and all Fireblocks customers’ funds are safe, and customer keys are backed up and recoverable,” it stated, adding that it was actively investigating the situation pending a response from the District Court.

Investment bank Cowen set to offer institutional-grade crypto custody

May 13, 2021 Coin Telegraph

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The 103-year-old bank wants to hold crypto for asset managers and hedge funds as Wall Street begins offering cryptocurrency products to institutional clients.

Cowen Inc., an independent American investment bank established over a century ago, is set to become the latest mainstream financial services company to enter the crypto custody business.

According to Bloomberg, Cowen has inked a partnership with Standard Custody and Trust Company. The collaboration will also include a $25 million investment in Standard’s parent company, PolySign Inc., which has Ripple chief technology officer David Schwartz on its board of directors.

According to Cowen, there is a growing demand for crypto exposure among institutional investors, with CEO Jeffrey Solomon stating: “We’re going to be able to help a lot of our institutional clients get over the hump and start trading digital assets in the not-too-distant future.”

Custody remains a major roadblock for institutional entry into the crypto scene, as hedge funds and asset managers are required by law to have client’s assets held by recognized custodial services. Commenting on the issue, Solomon elaborated:

“If you’re an institutional investor with a fiduciary requirement, the bar is extremely high for you to put investments in any asset that does not have a clear chain of custody that you can access at a moment’s notice. Even if you had a view on the asset class, if you can’t demonstrate custody then you can’t trade it.”

In recent times, some U.S. banks have begun to wade into the crypto custody scene. Back in 2019, Fidelity — which manages $4.9 trillion in assets — debuted its cryptocurrency custody product, and as previously reported by Cointelegraph, it has even expanded its coverage to Asia.

Cowen’s $25 million investment is part of a $53 million funding round for PolySign as it moves toward creating products that enable greater institutional adoption of cryptocurrencies. PolySign’s Standard Custody subsidiary also recently secured approval from the New York State Department of Financial Services to operate as a limited-purpose trust company.

First Digital Trust announces $2.15M funding for Asian digital payments service

April 22, 2021 Coin Telegraph

First Digital Trust announces .15M funding for Asian digital payments service

APAC

The funding will be used to develop debit and credit card payment rails in Asia.

Digital asset custodian First Digital Trust has secured funding to bring crypto asset payment services and upgrades to the Asia Pacific region.

The Hong Kong-headquartered company has raised $2.15 million in a convertible note funding round led by private investors including Asian venture studio Nogle. The total funding for the firm is now over $7 million according to Crunchbase which reported two prior funding rounds in March raising $5.2 million.

The firm stated that the funding will allow it to launch the first debit and credit card rail that will enable its digital assert clients to accept card payments seamlessly. Companies will be able to accept digital assets for payments in more than 100 currencies and offer instant settlement, custody and compliance using a simple widget.

FDT is Asia’s only qualified custodian and trustee capable of holding both traditional and digital assets.

CEO of First Digital Trust, Vincent Chok, stated that many firms have lost business due to the high-level minimum requirements and financial burdens associated with integrating credit and debit services with digital assets.

“Our mission is to open the gateway for open banking in Asia through regulated and compliant payment solutions.”

The announcement noted that in the West, companies such as MasterCard, PayPal, and Coinbase have spearheaded digital asset custody and open banking infrastructure upgrades whereas, in the East, fintech firms have been forced to jump through a variety of regulatory hoops, strike costly individual agreements with financial providers, or build their own infrastructure.

This is despite the fact that crypto trading and digital activity in Asia equivalent to the US and Europe combined. As reported by Cointelegraph in late January, the region accounts for almost half of global crypto trading.

The third round of fundraising this year follows the integration of Fireblocks, a leading enterprise-grade platform delivering a secure digital asset storage infrastructure. On March 18, Fireblocks secured a $133 million investment round led by America’s oldest bank, BNY Mellon.

FDT’s instant settlement technology, security and payment rail infrastructure, and compliance technology will be available to token issuers, payments providers, crypto exchanges, asset managers, banks, and brokers across the Asia Pacific region.

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