$35 Million Refund? Developer Appeals to Ethereum for Hack Reversal

On November 24, 2015, James Levy received 40,000 ether from the Ethereum Foundation.

Worth roughly $35,000 at the time (and nearly $35 million today), the grant was an award for Levy’s efforts to create an early smart contracting tool, and one of many meant to encourage work on what was then another nascent cryptocurrency in a sea of alternatives.

But three weeks later, the grant was gone, drained from his wallet in what might be the largest hack of a single wallet in the history of the ethereum platform.

The result of a weak passphrase, Levy has been silent on the matter ever since. But now, in order to fund a new venture called TapTrust, Levy is appealing to the hacker to return the funds, and failing that, he’s turning to the community to implement what would entail a system-wide software upgrade, or hard fork, to do so.

Such an upgrade would rely on EIP 867, a proposal to standardize the process of recovering funds on the platform, one that has been a point of conflict for ethereum developers.

At times heated, the discussion around the proposal is tilting toward blocking all attempts for the EIP to proceed. Former EIP editor Yoichi Hirai even stepped down from his post as a result, citing legal concerns that could ensue from allowing the proposal to develop. And with the developer community in an uproar, the proposal has been frozen in place as the process for accepting code changes gets considered more intently.

As a co-author of EIP 867, Levy has found himself in the eye of the storm as developers expose concerns about the proposal – everything from lamenting ethereum’s governance structure as it relates to system-wide catastrophes to predicting that stakeholders could collude with such proposals ratified.

Levy’s move is indeed controversial, but he feels that going public with his story might sway the current debate.

“Particularly in light of something like a hack, it’s a very important issue for the community, and it’s one that, I think, the network and the platform of ethereum and the community, we need to figure out,” Levy told CoinDesk in an exclusive interview.

As adoption continues to rise, and ethereum is increasingly adapted for use in enterprise organizations, Levy continued:

“Ultimately, I think it comes down to, are we an economic system that lives outside the rest of society and the legal system? Are we totally separate from that? Or, are we somehow going to interface with these things?”

The theft

To step back, the hack happened because of a weak passphrase, which could lead some to put the blame of Levy himself. Yet Levy defends his security efforts, saying that he suspected his private key would still be needed to access the wallet.

But the wallet generation tool Levy used, developed by ethereum creator Vitalik Buterin, had a critical flaw in that others could access the wallet just with the passphrase.

“I assumed that the passphrase was going to be used in addition to some other criteria,” Levy explained.

Later, when the wallet was drained, Levy found his private keys were still secure, and initially, he didn’t believe he had been the victim of a hack.

“At first I thought was due to an upgrade or something,” he said.

Shortly before the wallet had been emptied, new softwares, such as Brainflare (for brute-forcing passwords) were released, and so Levy tested the software on his own wallet, cracked the passphrase and learned the bitter truth about his grant money – it was gone.

Yet, he traced the funds to another wallet, and in watching the wallet ever since, hasn’t noticed any movement.

They’ve stayed at the same address, without “a single outgoing transaction in the entire history of the blockchain,” Levy said.

And while Levy first accepted the funds as permanently lost, it was the eerie silence of the hacker’s address (typically you would think a hacker would try and cash out or use the funds) that made him think a fund recovery might be possible.

Initially, Levy will just try some friendly communication.

“One of the things I am eager to do is to try to get in touch to whoever may have access to that new wallet, and to try to come up with something that we can agree to in terms of how to remedy the situation,” Levy explained.

But should that not work, Levy will submit another fund recovery proposal that builds on his former efforts with EIP 867.

Undoing finality

According to Levy, the new proposal requires “a very, very limited and well-defined and well-structured support for undoing finality,” such as the format offered by EIP 876.

With that, Levy could recover his funds and use a significant portion to build something that would benefit the blockchain’s community, including his new venture TapTrust, a Wikipedia-style forum for displaying objective information about tokens launched on ethereum.

“We’re trying to improve the quality of information available and improve the ability for average people to participate in this new crypto economy without compromising their safety,” Levy said.

It’s perhaps an especially notable statement since much of the controversy surrounding the fund recovery proposal was stoked because of poor communication, Buterin said during a recent developer meeting.

Levy knows his appeals might not do any good, but still believes they will start a broader conversation about a pain point the community needs to tease out.

While the latest discussion around fund recovery stemmed from a code vulnerability that allowed a newbie coder to freeze, at the time, $160 million worth of ether in Parity Technologies ethereum client, Levy said hacks should be looked at categorically differently.

“I think that if we want to encourage organizations and businesses and financial institutions to adopt ethereum, that this is, I think for a lot of them, going to be a requirement, that in the event of a catastrophic situation, there is at least something that they can try to do,” he said.

And it’s a question that touches on a deeper, more philosophical rift in the ethereum community – the concept of blockchain finality.

The concept was first excited in the community after The DAO hack, when the ethereum community voted in favor of hard forking the code to return funds to its original holders. Valuing immutability under the adage “code is law,” a dissenting group forked off the main ethereum chain, creating ethereum classic.

Such tensions are still active in the community today, as witnessed through the more recent funds recovery debates, that Levy wouldn’t be surprised if there was another split down the line.

Levy told CoinDesk:

“I wouldn’t be surprised if the network splits a some point over, not necessarily the issue of ETH recovery, but more generally, the issue of are we going to have a network that is technically pure, or are we going to have a network that we’re making some accommodations so that we can integrate with society.”

Money stack via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at [email protected].

Be the first to comment

Leave a Reply

Your email address will not be published.


Privacy Policy

WideBitcoin.com is committed to safeguarding your privacy. Contact us at if you have any questions or problems regarding the use of your Personal Data and we will gladly assist you.

By using this site or/and our services, you consent to the Processing of your Personal Data as described in this Privacy Policy.

Table of Contents

  1. Definitions used in this Policy
  2. Data protection principles we follow
  3. What rights do you have regarding your Personal Data
  4. What Personal Data we gather about you
  5. How we use your Personal Data
  6. Who else has access to your Personal Data
  7. How we secure your data
  8. Information about cookies
  9. Contact information


Personal Data – any information relating to an identified or identifiable natural person.
Processing – any operation or set of operations which is performed on Personal Data or on sets of Personal Data.
Data subject – a natural person whose Personal Data is being Processed.
Child – a natural person under 16 years of age.
We/us (either capitalized or not)

Data Protection Principles

We promise to follow the following data protection principles:

  • Processing is lawful, fair, transparent. Our Processing activities have lawful grounds. We always consider your rights before Processing Personal Data. We will provide you information regarding Processing upon request.
  • Processing is limited to the purpose. Our Processing activities fit the purpose for which Personal Data was gathered.
  • Processing is done with minimal data. We only gather and Process the minimal amount of Personal Data required for any purpose.
  • Processing is limited with a time period. We will not store your personal data for longer than needed.
  • We will do our best to ensure the accuracy of data.
  • We will do our best to ensure the integrity and confidentiality of data.

Data Subject’s rights

The Data Subject has the following rights:

  1. Right to information – meaning you have to right to know whether your Personal Data is being processed; what data is gathered, from where it is obtained and why and by whom it is processed.
  2. Right to access – meaning you have the right to access the data collected from/about you. This includes your right to request and obtain a copy of your Personal Data gathered.
  3. Right to rectification – meaning you have the right to request rectification or erasure of your Personal Data that is inaccurate or incomplete.
  4. Right to erasure – meaning in certain circumstances you can request for your Personal Data to be erased from our records.
  5. Right to restrict processing – meaning where certain conditions apply, you have the right to restrict the Processing of your Personal Data.
  6. Right to object to processing – meaning in certain cases you have the right to object to Processing of your Personal Data, for example in the case of direct marketing.
  7. Right to object to automated Processing – meaning you have the right to object to automated Processing, including profiling; and not to be subject to a decision based solely on automated Processing. This right you can exercise whenever there is an outcome of the profiling that produces legal effects concerning or significantly affecting you.
  8. Right to data portability – you have the right to obtain your Personal Data in a machine-readable format or if it is feasible, as a direct transfer from one Processor to another.
  9. Right to lodge a complaint – in the event that we refuse your request under the Rights of Access, we will provide you with a reason as to why. If you are not satisfied with the way your request has been handled please contact us.
  10. Right for the help of supervisory authority – meaning you have the right for the help of a supervisory authority and the right for other legal remedies such as claiming damages.
  11. Right to withdraw consent – you have the right withdraw any given consent for Processing of your Personal Data.

Data we gather

Information you have provided us with
This might be your e-mail address, name, billing address, home address etc – mainly information that is necessary for delivering you a product/service or to enhance your customer experience with us. We save the information you provide us with in order for you to comment or perform other activities on the website. This information includes, for example, your name and e-mail address.

Information automatically collected about you
This includes information that is automatically stored by cookies and other session tools. For example, your shopping cart information, your IP address, your shopping history (if there is any) etc. This information is used to improve your customer experience. When you use our services or look at the contents of our website, your activities may be logged.

Information from our partners
We gather information from our trusted partners with confirmation that they have legal grounds to share that information with us. This is either information you have provided them directly with or that they have gathered about you on other legal grounds. See the list of our partners here.

Publicly available information
We might gather information about you that is publicly available.

How we use your Personal Data

We use your Personal Data in order to:

  • provide our service to you. This includes for example registering your account; providing you with other products and services that you have requested; providing you with promotional items at your request and communicating with you in relation to those products and services; communicating and interacting with you; and notifying you of changes to any services.
  • enhance your customer experience;
  • fulfil an obligation under law or contract;

We use your Personal Data on legitimate grounds and/or with your Consent.

On the grounds of entering into a contract or fulfilling contractual obligations, we Process your Personal Data for the following purposes:

  • to identify you;
  • to provide you a service or to send/offer you a product;
  • to communicate either for sales or invoicing;

On the ground of legitimate interest, we Process your Personal Data for the following purposes:

  • to send you personalized offers* (from us and/or our carefully selected partners);
  • to administer and analyse our client base (purchasing behaviour and history) in order to improve the quality, variety, and availability of products/ services offered/provided;
  • to conduct questionnaires concerning client satisfaction;

As long as you have not informed us otherwise, we consider offering you products/services that are similar or same to your purchasing history/browsing behaviour to be our legitimate interest.

With your consent we Process your Personal Data for the following purposes:

  • to send you newsletters and campaign offers (from us and/or our carefully selected partners);
  • for other purposes we have asked your consent for;

We Process your Personal Data in order to fulfil obligation rising from law and/or use your Personal Data for options provided by law. We reserve the right to anonymise Personal Data gathered and to use any such data. We will use data outside the scope of this Policy only when it is anonymised. We save your billing information and other information gathered about you for as long as needed for accounting purposes or other obligations deriving from law, but not longer than 1 year.

We might process your Personal Data for additional purposes that are not mentioned here, but are compatible with the original purpose for which the data was gathered. To do this, we will ensure that:

  • the link between purposes, context and nature of Personal Data is suitable for further Processing;
  • the further Processing would not harm your interests and
  • there would be appropriate safeguard for Processing.

We will inform you of any further Processing and purposes.

Who else can access your Personal Data

We do not share your Personal Data with strangers. Personal Data about you is in some cases provided to our trusted partners in order to either make providing the service to you possible or to enhance your customer experience. We share your data with:

Our processing partners:

  • facebook.com
  • google.com
  • bing.com
  • twitter.com
  • pinterest.com

Our business partners:

  • facebook.com
  • google.com
  • bing.com
  • twitter.com
  • pinterest.com

Connected third parties:

  • facebook.com
  • google.com
  • bing.com
  • twitter.com
  • pinterest.com

We only work with Processing partners who are able to ensure adequate level of protection to your Personal Data. We disclose your Personal Data to third parties or public officials when we are legally obliged to do so. We might disclose your Personal Data to third parties if you have consented to it or if there are other legal grounds for it.

How we secure your data

We do our best to keep your Personal Data safe. We use safe protocols for communication and transferring data (such as HTTPS). We use anonymising and pseudonymising where suitable. We monitor our systems for possible vulnerabilities and attacks.

Even though we try our best we can not guarantee the security of information. However, we promise to notify suitable authorities of data breaches. We will also notify you if there is a threat to your rights or interests. We will do everything we reasonably can to prevent security breaches and to assist authorities should any breaches occur.

If you have an account with us, note that you have to keep your username and password secret.


We do not intend to collect or knowingly collect information from children. We do not target children with our services.

Cookies and other technologies we use

We use cookies and/or similar technologies to analyse customer behaviour, administer the website, track users’ movements, and to collect information about users. This is done in order to personalize and enhance your experience with us.

A cookie is a tiny text file stored on your computer. Cookies store information that is used to help make sites work. Only we can access the cookies created by our website. You can control your cookies at the browser level. Choosing to disable cookies may hinder your use of certain functions.

We use cookies for the following purposes:

  • Necessary cookies – these cookies are required for you to be able to use some important features on our website, such as logging in. These cookies don’t collect any personal information.
  • Functionality cookies – these cookies provide functionality that makes using our service more convenient and makes providing more personalised features possible. For example, they might remember your name and e-mail in comment forms so you don’t have to re-enter this information next time when commenting.
  • Analytics cookies – these cookies are used to track the use and performance of our website and services
  • Advertising cookies – these cookies are used to deliver advertisements that are relevant to you and to your interests. In addition, they are used to limit the number of times you see an advertisement. They are usually placed to the website by advertising networks with the website operator’s permission. These cookies remember that you have visited a website and this information is shared with other organisations such as advertisers. Often targeting or advertising cookies will be linked to site functionality provided by the other organisation.

You can remove cookies stored in your computer via your browser settings. Alternatively, you can control some 3rd party cookies by using a privacy enhancement platform such as optout.aboutads.info or youronlinechoices.com. For more information about cookies, visit allaboutcookies.org.

We use Google Analytics to measure traffic on our website. Google has their own Privacy Policy which you can review here. If you’d like to opt out of tracking by Google Analytics, visit the Google Analytics opt-out page.

Read more about cookies on our Cookie Policy

Contact Information

email: [email protected]

Changes to this Privacy Policy

We reserve the right to make change to this Privacy Policy.

You can configure your Internet browser, by changing its options, to stop accepting cookies completely or to prompt you before accepting a cookie from the website you visit. If you do not accept cookies, however, you may not be able to use all portions of the WideBitcoin Websites or all functionality of the Services.

Please note that disabling these technologies may interfere with the performance and features of the Services.

You may also disable cookies on the WideBitcoin Sites by modifying your settings here:

Visitor comments may be checked through an automated spam detection service.

Last Update: May 25, 2018