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On November 13, several users began complaining that a recent upgrade was erasing the wallet entirely and requiring users to enter their recovery passphrase to log in again. A few surprised users stated that they could not access their money.
Looks like an update just permanently locked up assload of liquidity on Phantom wallets. What a natural burn event lol https://t.co/jWeDE87SFT
— 🦄 IWinn🦄 (@iwinn_trades) November 13, 2024
Requests for restitution have been received after one user reported losses of $600,000, while others reported losses ranging from $10,000 to $100,000. Phantom, however, does not keep users' recovery phrases or have access to their money because it functions as a non-custodial wallet.
Under a non-custodial model, only the users retain their wallet keys, giving them more autonomy and putting all the onus of protecting their recovery phrases on them.
Phantom subsequently verified that the problem only affected a "small number of iOS users," despite first being thought to affect all users. The wallet provider claimed in a post-event statement that it has released an upgrade to stop the flaw from "affecting any additional users."
Phantom apologized for the situation and advised customers to support their recovery phrases, but it did not reveal the number of impacted users.
The company added, "We're determined to ensure this won't happen again." Phantom has suggested that users who need further help contact its support staff.
The event comes after the wallet experienced another setback during the Grass token airdrop in late October when a spike in activity caused the wallet to go offline for about three hours. Phantom ascribed transaction problems and erroneous balances on the backend load brought on by increased demand.
Less tech-savvy individuals in the crypto sector have long struggled with losing recovery phrases, failing to back them up, or misplacing the backup. Like backup alternatives in traditional finance, this has prompted the development of recovery services to help manage recovery terms more easily.
For example, in 2023, the hardware wallet manufacturer Ledger introduced its contentious Ledger Recover service. This optional, paid membership service provides consumers a safe seed backup alternative. Community members have also voiced privacy concerns, as they worry that the service might provide the manufacturer with access to private data necessary for money transactions.
Conversely, earlier this year, the DeRec Alliance revealed intentions to use a system that communicates secrets among specified entities without disclosing private information to create open standards for secure recovery using a decentralized method.
editor
Brenda has been a news writer since 2019 with a deep background in crypto. Brenda commits to producing excellent, well-optimized content to ensure consumer satisfaction.
