4 Crypto Millionaires Locked Out of a $3 Billion Fortune Revealed

Analytics firm Arkham released a list of the 10 richest people in crypto, whose fortune can be tracked on-chain. Predictably, the list is led by pseudonymous Bitcoin creator Satoshi Nakamoto, who holds over $100 billion in BTC.

Tron founder Justin Sun and Ethereum’s Vitalik Buterin also rank top. But four people on the rich list, which was published earlier this November, are notable in that they control billions of dollars in crypto, none of which they can spend.

Rain Lõhmus, James Howells, Stefan Thomas and Clifton Collins together hold about $2.7 billion worth of Bitcoin and Ethereum, Arkham said. All of the money can be seen on the open blockchain. None of it is usable either.

The four cases, ranging from lost passwords to an abandoned hard drive rotting away in a UK landfill, speak of human error. They’re now cautionary tales of the strengths and dangers of self-custody in the crypto economy.

“Standard crypto self-custody setup with private key + seed phrase as the only ways to access your blockchain account is not a good fit for most of the users,” Yehor Rudytsia, head of forensics at Extractor by Hacken, told Cryptonews. “It requires operational security knowledge and awareness.”

Unfortunate But Inevitable Part of Crypto Design

Unlike traditional bank accounts, crypto wallets do not provide users with an option to reset their passwords to reclaim assets once private keys are lost in self-custody. There’s no legal recourse to regain the funds either.

If you lose your password, your funds are gone for good. The design is intentional, analysts say, but it is also ‘unforgiving.’

“[In crypto], wealth exists in a kind of quantum state: visible and provable, yet untouchable,” Illia Otychenko, lead analyst at crypto exchange CEX.io, tells Cryptonews. “This turns blockchain into the world’s most transparent but also unforgiving financial system.”

Arkham’s on-chain crypto rich list surfaces high-profile examples of what happens when self-custody goes wrong.

1. Rain Lõhmus ($762 million)

Rain Lõhmus is an Estonian entrepreneur who founded LHV Bank, which focuses on emerging fintech companies. In 2014, Lõhmus invested about $75,000 in Ethereum’s initial coin offering (ICO), snatching 250,000 ETH.

The stash, now worth $762 million at the time of writing, sits in his wallet address untouched. The wallet’s assets, which include a few hundred dollars in altcoins from airdrops, represent a 1 million percent gain. In August, when ETH surged to $4,650, the wallet’s value hit $1.2 billion.

Lõhmus said in one interview that he lost access to the wallet and has no idea how to recover it. Over the years, the banker has spoken almost casually about the fortune out of which he locked himself.

He admitted that “it’s very common for me to lose passwords” and has offered 50% of the money in his wallet to anyone who can help recover it. Lõhmus also criticized private keys and called for better crypto usability.

“Perfect decentralization has other risks that you don’t usually think about,” he said, as reported by Arkham. “But it’s very common for me to lose passwords. I went to renew my ID card passwords; if it were crypto, I’d be in a big crisis again, but luckily the police and border police work.”

Lõhmus’ wallet address is marked as one of the top 25 ETH balances worldwide, rivalling even that of Ethereum co-founder Vitalik Buterin.

2. James Howells ($731 million)

You have probably heard of him by now. James Howells is an IT worker from Newport, Wales, who lost 8,000 BTC in 2013 after he “accidentally” threw away a hard drive containing the private keys to his rising Bitcoin fortune.

The drive is buried somewhere in the Newport landfill, holding the keys to a cache now worth a cool $731 million in Bitcoin. Howells, who claims to be “one of the first five people in the world to mine Bitcoin in 2009,” has spent years appealing to city officials for permission to search the landfill.

He even promised to donate a portion of the recovered funds to the local community. But the council has turned down his every effort, saying that searching the landfill would be costly, disruptive and unlikely to succeed. Howells was eventually forced to stop trying to retrieve the drive this year.

“I’ve put an offer to the Newport council to buy the landfill, but they’ve refused to engage with me,” Howells told the Crypto Banter podcast in August.

“I’ve tried to engage with them, I’ve tried the legal route, and I’ve tried to buy the landfill. What else do you want me to do?” he quipped with a sense of resignation.

3. Stefan Thomas ($639 million)

Open-source developer and early Bitcoin contributor Stefan Thomas was paid around 7,002 BTC for work he did in 2011, two years after the launch of Bitcoin, explaining how the cryptocurrency works in an animated video.

Thomas reportedly secured his private keys using IronKey, an encrypted USB stick, or hardware wallet, known for its high-grade security. He later lost the piece of paper on which he had written the wallet’s password.

IronKey provides 10 password attempts before it permanently erases its own data. Thomas has used up eight. The developer, who continues to be active in crypto, building platforms like Interledger, has watched helplessly as the value of his Bitcoin soared to $639 million at current prices.

Thomas has talked about the mental exhaustion of trying, and failing, to remember the password. He has resisted attempting the remaining guesses, worried that any failure would wipe away the BTC forever.

4. Clifton Collins ($546 million)

Irishman Clifton Collins was arrested in 2017 for growing and selling cannabis in Dublin, the Irish capital. Collins bought 6,000 Bitcoin at $5 in late 2011 and early 2012 using cash he made from growing cannabis.

He quickly spread the loot across 12 wallets, each holding 500 BTC. The 55-year-old wrote the wallets’ private keys on an A4 piece of paper, which he hid inside the aluminium cap of his fishing rod.

But when he was arrested on drug charges in 2017 and sentenced to five years, Collins’ landlord cleared the house following a break-in, with many of his items, including his fishing gear, taken to a dump in the city.

Workers from the dumpsite confirmed seeing discarded fishing gear, the Irish Times reported. However, waste from the dump is sent to Germany and China for incineration, and Collins’ fishing rod has never been found.

The ultimate loser was the Irish state, which confiscated the 6,000 BTC, thinking to have made its largest drug bust. Collins told police that he no longer had access to the wallets. The BTC, now worth $542 million, remains frozen in time.

Billions In Plain Sight

Bitcoin’s ‘lost assets’ problem is the unintended outcome of decentralization, which relies on private keys and self-custody. The implications of so-called “zombie wallets” for money supply and system credibility invite a second look at the design of Bitcoin.

“For mass adoption, we need to impose better user experience standards for crypto wallet self-custody management,” said Rudytsia, the Hacken forensics expert. “The most convenient way is to use account abstracted smart contract wallets with a ‘guardians’ system for your wallet recovery.”

“These guardians [either your own or a trusted person’s other wallets] can approve some administrative changes in the wallet according to the rules defined in the smart wallet setup.”

Multiple analyses estimate that 2.3 million to 4 million BTC, 11 to 20% of the total supply, are permanently lost due to forgotten passwords, death, or discarded drives. That’s $210 – $366 billion of value lost forever.

“The future likely requires hybrid solutions that preserve blockchain’s auditability while reducing the risk of irreversible loss,” said CEX.io exchange analyst Otychenko.

The post 4 Crypto Millionaires Locked Out of a $3 Billion Fortune Revealed appeared first on Cryptonews.