A long-time XRP investor loses $3 million stored in an Ellipal cold wallet due to a vulnerability from private key imports. This incident sparks debates on the true security of cold wallets and risky practices even experienced holders may engage in.
A cold wallet derives its security from the complete isolation of its private keys, generated offline and never exposed to the internet. When a user imports an existing private key into their device, this key has already been created elsewhere, sometimes in a compromised environment or one connected to the network.
Ellipal emphasizes this point: As soon as a private key is imported rather than natively generated by the hardware wallet, the security chain is broken. This key may have been exposed, copied, or stored in a vulnerable environment before import. The wallet then technically becomes “hot,” even if it remains physically disconnected.
This distinction is crucial. Many investors believe a cold wallet automatically protects any key placed in it. In reality, a hardware wallet can only guarantee the security of keys it generates itself. Importing seed phrases or external keys represents a major attack vector, regularly exploited by hackers.
The theft of $3 million in XRP illustrates the risks associated with concentrating funds in a single wallet. With the XRP price between $0.50 and $0.60, LaRoque held nearly 6 million tokens, a massive position exposed to a single point of failure. Experts recommend diversifying custody solutions through multi-signature strategies and several independent cold wallets to reduce risks—a direct application of the principle: Don’t put all your eggs in one basket.
This case reminds us that security depends as much on the user as on the hardware. The best cold wallets are powerless against human errors: importing compromised keys, digital storage of seed phrases, or using unverified applications. A single bad practice can nullify the protection offered by the device, turning a “cold” wallet into a vulnerable target.
Finally, cold wallets are not infallible. Some models, particularly those using Bluetooth or unofficial firmware, present potential vulnerabilities. Completely air-gapped devices remain the gold standard for security. For significant amounts, experts favor institutional or multi-signature solutions, the only ones capable of ensuring truly robust protection against modern threats.
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