Two Guesses Left: How 7,002 Bitcoin Got Locked Behind a Forgotten Password

He stored the private keys on an IronKey — a hardened encrypted USB drive — and wrote the password on a piece of paper. Then he lost the paper.

The IronKey allows ten password attempts. After the tenth failure it encrypts itself permanently and the contents are gone. Thomas has used eight.

At bitcoin's price on 9 August 2026 — around $77,200 — those coins represent roughly $540 million, behind two remaining guesses.

Why He Cannot Simply Brute-Force It

This is the question everyone asks, and the answer is the interesting part.

Ordinary encryption can be attacked by guessing very fast — millions of attempts a second against a copied file. The IronKey is built specifically to prevent that. The counter is enforced in hardware, inside a tamper-resistant chip, so you cannot copy the encrypted blob out and attack it offline. You get ten tries against the physical device, and the device is the judge.

Kingston, which owns IronKey, has been unambiguous: there is no recovery path after ten failed attempts. That is not a support policy. It is the product working as designed.

The Attempts to Break It

The story has attracted serious technical attention.

A security firm called Unciphered has claimed it developed a method to bypass the attempt limit on IronKey devices — reportedly by physically decapsulating a comparable unit with nitric acid, removing tamper-proofing layers, imaging the internals under a microscope, and then simulating password attempts in a way the device could not count. The scale claimed was in the region of 200 trillion attempts.

Others, including hardware-security researcher Chris Tarnovsky and the investigative firm Naxo, have also pursued it.

As of mid-2026 no successful recovery has been confirmed, and the drive is reported to be held in a Swiss vault. Note the shape of that carefully: a method demonstrated on a similar device is not the same as a recovery performed on this device. Coverage frequently blurs the two.

What Actually Went Wrong

It is tempting to read this as "he forgot a password". That is the symptom. The failure is architectural, and it is one an enormous number of people are running right now:

He had one secret, in one place, protected by a mechanism designed to destroy it.

Every property that made the IronKey a good choice for storing something valuable — hardware-enforced attempt limits, tamper resistance, no vendor backdoor — became the reason the money is unreachable. The device did its job perfectly. That is the whole problem.

How To Not Be This Story

The fixes are unglamorous and they work.

1. The recovery phrase is the asset. Treat it that way. Modern wallets generate a 12- or 24-word recovery phrase. Anyone with those words has the coins; anyone without them does not, regardless of what hardware they hold. Back up the phrase, not the gadget. Thomas's problem was that his access lived in a password rather than in a phrase he could copy.

2. Redundancy beats secrecy — up to a point. Two or three copies in physically separate locations survives fire, flood and theft-of-one. Steel backup plates exist because paper is fragile. The counter-risk is obvious: every copy is a place someone could find it, so location matters as much as count.

3. Use a passphrase you can reconstruct, not one you must remember. If you add a passphrase on top of a seed — sometimes called a 25th word — it must be recorded with the same discipline as the seed itself. A passphrase that exists only in your memory is a single point of failure with a biological expiry date.

4. Store the procedure, not just the secret. Write down which wallet software, which derivation path, which device. Recovering a seed you cannot identify the format of is its own trap.

5. Test the restore. Wipe the device, restore from the backup, confirm the balance appears. Do it once, deliberately, with a small amount first. A backup you have never used is an assumption.

6. Keep the everyday password problem separate from the key problem. Exchange logins, email and 2FA recovery codes are a different category of secret, and a dedicated password manager such as NordPass is the right tool for those. It is not the right place for a seed phrase, and no reputable wallet will ask you to paste one anywhere.

A hardware wallet like Tangem keeps keys off internet-connected machines, which addresses theft. It does not address loss — that is what the backup discipline above is for. The two risks are separate and need separate answers.

The Advanced Answer: Split The Secret

Everything above still leaves one uncomfortable property — somewhere, at some moment, the whole secret exists in one place. Two approaches remove that, and both are worth knowing about even if you decide against them.

Multisignature. Instead of one key controlling the coins, you require m of n keys to sign — 2-of-3 is the common shape. Keep one key at home, one with a solicitor or in a bank box, one with a trusted person or a service. Any single key being lost, stolen or burnt does not lose the money, and any single key being compromised does not spend it. The cost is complexity: you now have three things to document and a recovery procedure your heirs must be able to follow.

Shamir-style splitting. Some wallets can split a seed into several shares, of which a threshold reconstructs it. Mathematically similar guarantee, different trade-off: shares are useless individually, but you must keep the scheme's details straight or reconstruction fails.

Both fix the Stefan Thomas failure mode directly. Neither is free, and both introduce a new one — a scheme so clever that nobody but you can execute it is just a slower way of losing the coins. Whatever you build, write the procedure down in plain language and check that someone else could follow it without you in the room.

For most people holding modest amounts, a well-backed-up single seed on a hardware wallet is the right answer. The multisig conversation starts when the sum involved would change your life.

The Uncomfortable Arithmetic

Estimates of permanently lost bitcoin run into the millions of coins — from early miners who discarded drives, from wallets whose owners died without leaving instructions, from exactly this kind of encrypted-and-forgotten storage. Because supply is capped, every lost coin makes the remainder marginally scarcer. Thomas's 7,002 coins are, in effect, a donation to everyone else who holds bitcoin.

He has spoken about making peace with it. That is the healthiest available response, and it is also the reason the story is worth reading before you set up custody rather than after.

If you are building or reviewing a setup now, start with our crypto wallet security guide, then how to set up a crypto wallet for the mechanics. And for the version of this story where the key is not encrypted but simply buried, see the 8,000 bitcoin in a Newport landfill.

Nothing here is financial advice. Crypto assets are volatile and you can lose everything you put in.