SecondFi has identified the root cause of the recent exploit that targeted hundreds of Cardano wallets. It warned affected users not to restore their recovery phrases into another wallet, as the compromise occurs at the private key level rather than the wallet application itself.
In an investigation update published on June 25, the Cardano wallet provider said the attack stemmed from a deterministic nonce derivation flaw in its software signer. This allowed attackers to mathematically reconstruct private keys from publicly available blockchain data after affected addresses signed transactions.
The findings come days after the exploit drained approximately 16 million ADA, worth about $2.4 million. It affected 374 wallets across four separate wallet-draining events.
SecondFi says signing flaw exposed private keys
According to SecondFi, the vulnerability existed at the address level. This means compromised keys remain exposed even if users import the same recovery phrase into another Cardano wallet.
The company said every transaction signed by an affected address leaked sufficient information for attackers to derive that address’s private key from on-chain data.
As a result, SecondFi urged affected users not to migrate their recovery phrases to another wallet or attempt to move funds independently. It warned that compromised addresses could be drained again.
It also cautioned against withdrawing staking rewards, as such transactions could expose funds to attackers monitoring the mempool.
Instead, the wallet provider advised affected users to wait for its official recovery process while submitting claims through its support portal.
Recovery effort enters next phase
SecondFi said it has completed mapping all wallets affected during the initial exploit and has begun the next stage of its recovery program.
The company confirmed that 374 wallet addresses were impacted, with approximately 16 million ADA compromised. It added that emergency containment efforts have already secured around 129 million ADA, which is being held pending recovery operations.
SecondFi has also established a dedicated restoration fund to reimburse affected users and engaged multiple external security firms to audit its systems before resuming normal operations.
The platform remains in maintenance mode while independent security reviews continue.
Investigators identify two attacker groups
As part of its latest update, SecondFi said it had identified and isolated the blockchain addresses associated with two attackers responsible for the automated wallet-draining campaigns between June 21 and 23.
According to the investigation, one attacker drained 171 wallets across two waves. At the same time, a second actor compromised 203 wallets during a separate sweep.
The company also disclosed that approximately 4.02 million ADA linked to the exploit remains in one identified collection wallet. The wallet has been flagged and remains under active monitoring.
Final Summary
- SecondFi traced the Cardano wallet exploit to a deterministic nonce-derivation flaw that enabled attackers to reconstruct private keys from public blockchain data.
- The company has launched a recovery program, identified two attacker groups, and warned affected users not to restore compromised recovery phrases into other wallets.
