Ledger Pre-Initialized Hardware Wallets

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Ledger

Ledger authorized some hardware wallets for resale through Amazon. Amazon allowed returns of these products by mistake. As a result, criminals added seed phrases and returned the hardware wallets. This resulted in customers receiving official wallets with seed phrases already provided. It appears that at least one user got scammed and lost funds, though the details are not known.

This is a global/international case not involving a specific country.

About Ledger

"Based in France, Ledger is the largest cryptocurrency hardware wallet company." "Ledger is a hardware cryptocurrency wallet that is used to store, manage, and sell cryptocurrency. The funds held in these wallets are secured using a 24-word recovery phrase and an optional secret passphrase that only the owner knows."

"Ledger offers two products, the Nano S and Nano X, that can store the digital keys used to secure crypto wallets. The devices can be used with a variety of cryptocurrencies, are compatible with numerous apps, and are supposed to offer a safe way to manage crypto without compromising too much on convenience. Ledger says on its website that it has sold 1.5 million products to customers in 165 countries to date."

"Amazon store branding is not as easy as just "calling your store" this or that. Only official brands can create OFFICIAL Amazon Stores. In order to create The official Ledger Store on Amazon, or ANY BRAND in fact, the brand itself would have to send in legal paperwork, and trademark documentation to verify they are the real brand. The issue people are having is clearly that Amazon resells returned fulfilled by amazon items. Amazon does this with any FBA products and obviously doesn't understand how sensitive this item particularly was."

"One of [Ledger's] user[s] got recently scammed on Amazon. The user bought a Ledger Nano S which had already been initialized by a malicious seller. The malicious seller sent a Nano already initialized to the user with a recovery sheet filled with the 24 words."

"Today I received my brand new Ledger Nano S from Amazon (from Ledger's store). The box had security seals and inside there was an envelope with a security seal as well."

"When I opened the envelop, I found 3 sheets for the recovery phrase empty, and a laminated sheet with a PIN and a 24 word recovery phrase."

"You guessed it, when I started the device, the first thing it did was ask me for the PIN found in the laminated sheet."

"When a user receives its Ledger wallet, whether it is a Nano S or X, she/he must always initialize first it by [p]owering on the device, [g]enerating a pin code by himself/herself, [and g]enerating the 24 words (seed phrase) by himself."

"We recently learned from Amazon that the product you received is likely not a new condition Ledger product but rather a product returned to and re-stocked by Amazon, despite our instructions to Amazon not to restock returned products."

"An investigation suggests that it might have been part of a batch of products that may have been tampered with by criminals. By abundance of caution, we wanted to contact every user that we suspect may be impacted."

"[N]o pin code or seed phrase should ever be given to the user by anybody else prior to the initializatio[n]."

This is a global/international case not involving a specific country.

The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.

Include:

• Known history of when and how the service was started.
• What problems does the company or service claim to solve?
• What marketing materials were used by the firm or business?
• Audits performed, and excerpts that may have been included.
• Business registration documents shown (fake or legitimate).
• How were people recruited to participate?
• Public warnings and announcements prior to the event.

Don't Include:

• Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
• Anything that wasn't reasonably knowable at the time of the event.

There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.

The Reality

This sections is included if a case involved deception or information that was unknown at the time. Examples include:

• When the service was actually started (if different than the "official story").
• Who actually ran a service and their own personal history.
• How the service was structured behind the scenes. (For example, there was no "trading bot".)
• Details of what audits reported and how vulnerabilities were missed during auditing.

What Happened

The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.

Key Event Timeline - Ledger Pre-Initialized Hardware Wallets

Date	Event	Description
March 3rd, 2021 7:38:00 PM MST	Main Event	Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.

Technical Details

This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?

Total Amount Lost

The total amount lost is unknown.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

Immediate Reactions

How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

Ultimate Outcome

What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

Total Amount Recovered

There do not appear to have been any funds recovered in this case.

What funds were recovered? What funds were reimbursed for those affected users?

Ongoing Developments

What parts of this case are still remaining to be concluded?

General Prevention Policies

The safest strategy is to always buy the hardware wallet directly from Ledger and always be sure to initialize it with a newly generated seed phrase. While it is unlikely that someone who had tampered with a Ledger device would also send a seed phrase with the package, anything is possible.

When setting up a new wallet of any sort, it is also a good practice to only transfer a small quantity of funds first, transferring the rest if those funds remain safe. This minimizes damage from any theft incident involving immediate removal of the funds. Advanced users may also set up a multi-sig with hardware wallets from different manufacturers all required to sign the outgoing transaction. You should also test the wallet to make sure that you can withdraw funds and didn't make a mistake in the setup.

Individual Prevention Policies

No specific policies for individual prevention have yet been identified in this case.

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Policies for platforms to take to prevent this situation have not yet been selected in this case.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

No specific regulatory policies have yet been identified in this case.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.