Fireblocks ETH 2.0 Key Management Incident

June 22 2021 — On the 2nd of May 2021, we were informed by one of our custody providers, Fireblocks, that 38,178 of our staked Ethereum may have been rendered inaccessible because of a failure by Fireblocks to secure the cryptographic keys as they were required to do.

Attempts to resolve this issue with Fireblocks have unfortunately not been successful, and accordingly, proceedings were issued out of the Israeli High Court today.

In short, a series of errors by Fireblocks caused the loss of 2 keys that are part of the 3-of-4 threshold signature for the shards that form the withdrawal key. Fireblocks (1) did not generate their private keys in a production environment, (2) did not include the private keys required to decrypt their 2 key shares in the backup, and (3) lost both keys.

In the coming weeks, there will be a public statement that will describe the next steps for StakeHound. In the meantime, we will perform a smart contract upgrade with immediate effect that will allow for the removal of stETH from the liquidity pools, while preventing it from being sent to the pools. As set out in our Terms and Conditions, we will continue to purchase stTokens and distribute staking rewards subject to availability and at our sole discretion.

We have been deeply touched by the support of our community and partners during what have been difficult and unprecedented events.

Thank you.