$15 billion Bitcoin private key vulnerability exposed: Is this the real reason behind the market's intense volatility?

In October 2025, the U.S. Department of Justice filed a lawsuit against the Cambodian Prince Group and its leader, Chen Zhi, and confiscated approximately 127,271 bitcoins, valued at nearly $15 billion at the market price at that time.

The initial source of this massive sum was 120,000 bitcoins transferred after a hacker attack on the Lubian mining pool in December 2020, which was worth about $3.5 billion at the time.

Analysis indicates that the fundamental reason for asset seizure was the use of a weak pseudo-random number algorithm during private key generation, making the private keys vulnerable to brute-force cracking.

Background: The Five-Year Journey from Mining Pool Theft to Government Seizure

This $15 billion Bitcoin asset seizure case is actually a complex event spanning five years. The story begins on December 29, 2020, when the renowned Lubian mining pool was hacked, and approximately 120,000 bitcoins were transferred in a short period.

At that time, the Bitcoin price was about $9,800, making the assets worth around $35 billion; now, they are close to $150 billion.

Subsequent investigations revealed that the actual control of these large Bitcoin holdings belonged to Chen Zhi, chairman of the Cambodian Prince Group. As a result, this incident is also called the “Prince Group Mining Pool Theft Case.”

Until October 2025, the Eastern District of New York federal court disclosed this unprecedented crypto asset seizure case, with the U.S. Department of Justice officially confiscating 127,271 bitcoins.

Technical Vulnerability: The Deadly Flaw in Weak Random Number Generators

This incident exposed the most critical weakness in cryptocurrency security—the private key generation process. Bitcoin private keys should be a 256-bit random number, with 2^256 possible combinations, making them theoretically nearly impossible to crack.

However, tools like Lubian mining pool used the Mersenne Twister MT19937-32 pseudo-random number generator, which is not truly random.

This pseudo-random algorithm has serious design flaws, akin to a “coin-flip machine” stuck cycling through limited patterns, drastically reducing the private key space.

Attackers who understood this pattern could perform brute-force enumeration to quickly try all weak private keys, thereby unlocking the corresponding Bitcoin wallets.

According to statistics from the Milk Sad research team, between 2019 and 2020, wallets with these weak keys held over 53,500 bitcoins in total.

Asset Tracking: From Hacker Attacks to Government Seizures

The path of these bitcoins reflects the complex flow of crypto assets. On December 28, 2020, abnormal on-chain transactions occurred, with numerous wallets in the Lubian weak key range being emptied within hours—about 136,951 bitcoins transferred out in a single transaction.

At the time, with a price of approximately $26,000 per bitcoin, this was worth about $3.7 billion.

The transfer fee was fixed at 75,000 satoshis, regardless of the amount, indicating that the operator was highly familiar with Bitcoin network operations.

Some of the funds later returned to Lubian mining pools for subsequent mining rewards, suggesting not all transferred assets fell into hacker hands.

By July 2024, these bitcoins were consolidated, and on-chain analysis platforms in the U.S. quickly identified that the consolidated bitcoins originated from Lubian’s “stolen” bitcoins.

This enabled the U.S. government to classify these bitcoins as belonging to Chen Zhi and proceed with judicial confiscation.

Market Reaction: Bitcoin Price Trends and Investor Sentiment

At the time of this revelation, the Bitcoin market was at a critical juncture. In early 2026, Bitcoin’s price briefly fell from a high near $98,000 to around $60,000. But by February 11, the price had rebounded to about $67,000.

Futu Securities senior analyst Feng Wenhui pointed out that the current Bitcoin fear and greed index has fallen to nearly 15, entering “extreme fear” territory.

Historical experience shows that when the market is in “extreme fear,” it often presents a contrarian buying opportunity. Using Fibonacci retracement levels, this wave’s high was near $126,000, dropping to about $74,000. Initial resistance on the rebound is around $86,000, with further upside targeting near $95,000.

Regulatory Upgrades: New Global Compliance Requirements for Cryptocurrencies

This incident is driving significant changes in the global regulatory environment for cryptocurrencies. In 2025, there was an unprecedented surge in crypto-related company IPOs, indicating that the market perceives digital asset firms as being structurally prepared.

Increased regulatory transparency has become a crucial catalyst.

Mid-2025, the “Genius Act” was passed, establishing the first federal regulatory framework for “permitted stablecoins,” requiring stablecoins to be backed by 100% liquid assets.

The “Clear Act,” passed by the House of Representatives, further advanced this process, aiming to create a unified market framework for digital assets and clearly delineate the jurisdiction of the SEC and CFTC.

Industry analysts forecast that by 2026, the circulation of stablecoins will surpass $1 trillion. This shift is not driven by retail speculation but reflects modernization in corporate financial management.

Investment Strategies: Secure Storage and Platform Selection

Against the backdrop of private key security concerns, investors need to reassess their asset storage strategies. Bitcoin does not have traditional passwords or account systems, nor does it rely on banks or centralized identity verification.

In the Bitcoin system, the only thing that determines whether you can access a certain fund is the private key.

Owning the private key equals actual ownership of Bitcoin; losing it means the Bitcoin can never be recovered, and if it is leaked, assets can be transferred away instantly.

In custodial wallets, private keys are managed by platform servers, meaning users do not hold their own keys. The security of user assets depends on the platform’s security measures.

Almost all major theft incidents have involved custodial models. Investors should carefully evaluate exchange security measures, including whether they use cold storage, have sufficient reserves, and maintain insurance funds.

Market Outlook: Institutional Entry and Cyclical Changes

The cryptocurrency market is undergoing a structural transformation. According to market maker Wintermute, the four-year halving cycle for Bitcoin may have ended, with institutional products like ETFs reshaping the landscape.

In 2025, altcoin rallies averaged only 20 days, less than the over 60 days seen in 2024.

A small number of major assets absorbed most of the new capital, while the broader market struggled to sustain momentum.

By 2026, catalysts for market expansion may include institutional investments, strong gains in Bitcoin or Ethereum, or retail investor re-entry.

ETFs and digital asset trusts have evolved into “walled gardens,” providing sustained demand for large assets but not naturally rotating capital into the wider market.

Summary

As of February 11, Bitcoin is trading at approximately $67,000 on Gate.io, with the fear and greed index at a dangerously low 15, indicating extreme fear.

The 127,271 bitcoins newly seized by the U.S. Department of Justice are quietly resting in the treasury, still valued at around $15 billion at current prices.

The key to this massive asset seizure was not quantum computing breaking encryption or hackers breaching firewalls, but a seemingly trivial technical detail—the choice of pseudo-random number generator.

As Bitcoin ETFs attract institutional capital, the alarm for private key security has sounded: regardless of market noise, the true determinant of asset ownership remains that 256-bit key.