The funds were held in a software wallet, and the loss occurred without the victim signing a single transaction. Malware simply extracted the private keys, giving attackers full access to the assets. For crypto users, this is a stark reminder: holding large sums in a software wallet is a gamble.

Even experienced investors can fall prey to malicious code. In this case, the thief did not trick the user into sending funds. Instead, the software wallet itself was compromised, exposing the keys needed to access the funds. It is a scenario that underlines a hard truth in digital asset security: software wallets are convenient, but they are vulnerable.

Why Hardware Wallets Matter

Software wallets are applications that store your private keys on a computer or mobile device. They are easy to use, but because they are connected to the internet, they are exposed to viruses, malware, and phishing attacks. When large sums of money are stored this way, the risk is not theoretical—it is imminent.

Hardware wallets, on the other hand, keep private keys offline and isolated from potentially infected devices. Even if your computer is compromised, attackers cannot access funds stored on a hardware wallet without physical access to the device. Real-world examples show the difference.

$1.35M was stolen from a Thorchain cofounder. Yet another reminder: if your keys are stored in a software wallet, you’re only one malicious code execution away from losing everything.

In this case, the victim didn’t even sign a malicious transaction, the malware simply stole the… pic.twitter.com/nLS4nWNFyt

— Charles Guillemet (@P3b7_) September 12, 2025

The trend is clear: as digital assets grow in value, targeting software wallets has become more profitable and more common. According to Chainalysis, crypto thefts and scams reached over $3.8 billion in the first half of 2023 alone, with software wallet compromises accounting for a significant share.

Thorchain Cofounder Pushes Vultisig for Next-Gen Security

In response to the recent $1.35 million theft, the Thorchain cofounder has proposed using Vultisig, a next-generation crypto wallet designed for the AI agent era. Vultisig aims to redefine wallet security by combining multi-chain support with multi-factor authentication, eliminating the need for traditional seed phrases.

Yes, called @vultisig

open-source threshold signature wallet

try it out https://t.co/SpIzscGxQh

— JP (@jpthor) September 4, 2025

This approach allows users to manage assets across different blockchains. This is while adding layers of protection against malware and key theft. By moving beyond single-key models, Vultisig could set a new standard for securing large crypto holdings.