I am the customer Google login was invented for. Give me a seed phrase on a piece of paper and I would lose everything within a month. No hacker required.
So I understand why a crypto wallet lets you sign up with your Google or Apple account. But in November 2026, that convenience produced one of the strangest stories I have read in this market: a theft, then a rescue carried out through the thief’s own door, then a rescue that the internet first reported as a second theft. The funds may be safe. The legal questions are not.
What happened to the Keplr wallets
Keplr, a popular wallet in the Cosmos ecosystem, lets users create a wallet with a Google or Apple login. Behind that login sits Web3Auth, a wallet infrastructure provider owned by Consensys since June 2025 and now marketed as MetaMask Embedded Wallets. The user never sees a recovery phrase, but there is still a private key behind the wallet. The login replaces the paperwork. It does not replace the key.
According to Keplr and Web3Auth, a flaw in Web3Auth’s infrastructure exposed the private keys of some of these social-login wallets. Wallets created with a recovery phrase or a hardware wallet were not affected. Google and Apple were not hacked: the failure was in the provider behind the login. Keplr’s co-founder estimated that about 20% of its social-login accounts were exposed.
The story then unfolds in three acts.
Act one: the theft. According to the on-chain analysis firm Bitquery, the first theft took place on 1 November. By 12 November, it had attributed at least USD 1.82 million to the attacker, taken from 7,842 Cosmos wallets, 52 Ethereum wallets and 13 Hyperliquid accounts, and it called that figure a floor because the attacker was still active.
Act two: the rescue. On 6 November, Web3Auth paused its wallet service. It then began emptying the exposed wallets that the attacker had not yet reached, using, in its own words, the same path as the original attacker. Bitquery counted at least 44,041 wallets on seven Cosmos chains, plus thousands more on Injective, whose funds were moved to Web3Auth’s recovery addresses: about USD 6 million in total. On 8 November, Web3Auth published twelve recovery addresses, and the press found about USD 5.6 million sitting in them.
Act three: the confusion. Before that list was published, the rescue looked exactly like a theft. All eight addresses that Bitquery had first attributed to the thief turned out to be on Web3Auth’s recovery list. For a user, there was no difference either: you opened your wallet and your balance was gone. Keplr had to tell its users that an empty wallet might mean their money had been saved, not stolen.
And it is not over. On 13 November, MANTRA, one of the Cosmos networks, paused new unstaking requests for seven days after attackers used the exposed keys to unstake victims’ tokens. Web3Auth has said its investigation continues and that a full report will follow. So far, I have found no announcement that every rescued token has been returned to its owner.
Three numbers that are easy to mix up
The first figures came from on-chain tracking on 7 November, before Web3Auth had published its recovery addresses: more than USD 6 million moved out of more than 44,000 wallets, and early reports read it as theft. Bitquery corrected its own analysis once the list came out. The confusion was understandable: seen from the outside, a rescue and a theft look exactly the same. But there are three different numbers here: the wallets rescued, the wallets robbed and the money lost. The 44,041 wallets and the USD 6 million are mostly the rescue. The theft is at least USD 1.82 million, from fewer than 8,000 wallets.
There is a lesson here that goes well beyond Keplr. A blockchain shows you that assets moved. It does not tell you who was entitled to move them, why, or what the person who now holds them owes you. Transparency of movements is not transparency of rights.
Which law applies?
Before any lawyer gets excited, a word of caution. Keplr’s published terms of use choose Panamanian law and arbitration in Panama. Consensys’ terms choose Texas law, English law or Irish law depending on where the user lives. Swiss law is not the law of this case.
But many of my clients build wallets, custody services and crypto businesses in Switzerland. So the useful question for them is this one: if the same rescue happened under Swiss law, how would we analyse it?
Was there a mandate?
The first question is contractual: had the users already authorised this kind of intervention?
Keplr’s terms allow it to restrict or suspend access, including for security reasons. Consensys’ terms allow immediate suspension of the service in case of a security risk. But suspending a service is one thing. Signing transactions and moving customers’ assets to your own addresses is another. Keplr’s terms even describe the wallet as non-custodial and state that Keplr has no ability to retrieve or transfer its contents. In the public terms I reviewed, I found no clause expressly authorising a provider to use a compromised access route to move users’ assets into wallets it controls.
That does not prove there was no legal basis at all. We do not have the private agreement between Keplr and Web3Auth, nor every version of the terms each user accepted. Under Swiss law, an existing contract could impose a duty to protect the client, and if the relationship were a mandate, article 397 of the Code of Obligations allows the agent to depart from instructions when the client cannot be asked in time and would presumably have agreed.
Managing someone else’s affairs without a mandate
If there was no sufficient authorisation, Swiss law has a precise tool for this situation: management of another person’s affairs without a mandate, the gestion d’affaires sans mandat of articles 419 and following of the Code of Obligations.
The rule is simple to state. Whoever steps in must act in the interest of the owner and according to his presumed wishes (article 419). He is liable for negligence, but the standard is softer when he acted to prevent imminent harm (article 420). If the intervention was justified, he can recover the necessary and useful expenses he incurred (article 422). That is a right to expenses, not a right to a rescue fee. And if the owner later approves the intervention, the rules of mandate apply (article 424), which is not the same thing as waiving every claim.
On the facts as published, the case for intervening is strong. If a thief can empty a wallet at any minute, and asking 44,000 users one by one would let him finish first, moving the funds to safety is probably what a reasonable owner would have wanted. But a good intention does not answer every question. Which wallets were really exposed? Why was the destination safer? Was anything converted or put at risk in the process? How was each owner’s share recorded? And what was the plan for giving control back?
The rescue does not erase the breach
There are two separate files here. A provider can take the right decision in an emergency and still be liable for the failure that created the emergency. Equally, the fact that an attack succeeded does not, on its own, prove negligence. The answer depends on what security the provider promised, what caused the breach, what warning signs existed and how fast it reacted.
Limitation-of-liability clauses would also need a close look. Under Swiss law, article 100 of the Code of Obligations prevents a party from excluding in advance its liability for intent or gross negligence, and article 101 makes it answer for its auxiliaries. A clause saying “non-custodial” does not settle every question of responsibility.
Swiss VASP: the rescuer has become a custodian
This, to me, is the most important point, and the one most commentators missed.
Before the incident, Web3Auth was a technology provider for wallets described as non-custodial. After the rescue, it was holding around USD 6 million belonging to tens of thousands of wallets, in addresses it controls. Whatever the label, that is custody.
In Switzerland, holding crypto assets for others with the power to dispose of them is financial intermediation under the Anti-Money Laundering Act. A Swiss VASP (virtual asset service provider) that does it must be affiliated with a self-regulatory organisation, an SRO, recognised by FINMA, or hold a FINMA licence. Custody is not a by-product of a technical service. It is a regulated activity, with its own duties.
And then comes the question every user should ask: if the custodian goes bankrupt before giving the assets back, do I get my coins, or do I join the queue of creditors? Since 2021, article 242a of the Debt Enforcement and Bankruptcy Act allows crypto assets held for clients to be separated from a bankrupt custodian’s estate, but only if the custodian has undertaken to keep them available for the client and they are either allocated to him individually or held in a pool where his share is clearly determined. Calling an address a “recovery wallet” does not meet those conditions. Records do. It is the same lesson as allocated and unallocated gold, which I explained in Tokenised Gold in Switzerland: The Bar Matters More Than the Token.
FINMA made the same point in its Guidance 01/2026 on the custody of crypto-based assets, published on 12 January 2026: dependence on a custodian, counterparty risk and the extra legal difficulties of holding assets abroad, in particular in an insolvency. A rescue does not suspend those risks. It concentrates them.
Giving the assets back is the hard part
Returning the funds raises a problem that is technical first and legal immediately after. When a private key has been compromised, a signature made with that key no longer proves who you are: the owner and the thief can both produce it. The return procedure therefore needs another way to verify each claim.
The questions are concrete. What proof will a user need? Who decides between two people claiming the same wallet? What about company wallets, deceased holders, or users who have lost access to their Google account? Will tokens be returned in kind, with the staking rewards they would have earned? Will any costs be deducted, and on what basis? And will users be asked to sign a release of their claims for the original breach in exchange for getting their assets back? I am not saying Web3Auth will impose such conditions. I am saying these are the questions a user should ask before signing anything.
And the “white hat”?
The words white hat are not a legal authorisation. Under Swiss criminal law, entering a protected computer system without right is examined under article 143bis of the Criminal Code, and signing a transaction on a public blockchain does not by itself prove that offence. Even if an act did meet the elements of an offence, the defence of necessity in article 17 of the Criminal Code could apply: an imminent danger, no other way to avert it, and the protection of a higher interest. Intention matters. So do authority, necessity, proportionality and what happens next.
One more caution. Being able to exploit an exceptional flaw does not prove that the provider normally had unlimited control over every wallet. Claiming a permanent backdoor would require evidence that has not been published.
A rescue may justify taking control in an emergency. It also creates a duty to explain what was done and to open a lawful road back to the owner. For the customer, the rescue is complete only when control has been safely restored.
How FintechLex can help
This case is a stress test for every wallet and custody business. If you build or run one, the questions above should be answered in your structure and your contracts before an incident, not after it. We help you:
- decide whether your wallet is really non-custodial or whether you hold assets for others, and what that means for your licence;
- obtain SRO affiliation for a Swiss VASP, or acquire a ready-made company already affiliated with an SRO;
- set up custody so that clients’ crypto can be separated in a bankruptcy under article 242a, with segregated records and clear allocation;
- write terms of use that say who may intervene in an emergency, where assets go, and how they come back.
If you want to move fast, we offer a turnkey SRO on a shelf company, ready to carry a Swiss VASP activity. The words that matter in this story, from custody to finality, are explained in our Stablecoin Glossary, and the whole machinery behind them in my book What Nobody Tells You About the Plumbing of Crypto.
Write to us at insight@fintechlex.com or on WhatsApp +41 787 983 770.
Rene-Philippe
Sources: Bitquery, investigation into the Keplr wallet incident (updated 12 November 2026); The Block, report on Web3Auth’s recovery addresses (8 November 2026); public statements by Keplr and Web3Auth (6 to 12 November 2026); MANTRA announcement on the unbonding pause (13 November 2026); Keplr terms of use (effective 10 August 2026); Consensys terms of use (June 2026); Swiss Code of Obligations, articles 100, 101, 397 and 419 to 424; Debt Enforcement and Bankruptcy Act, article 242a; Swiss Criminal Code, articles 17 and 143bis; Anti-Money Laundering Act, article 2; FINMA Guidance 01/2026, Custody of crypto-based assets (12 January 2026). Based on public information available on 14 November 2026.
This article is for general information only and does not constitute legal advice. The Swiss-law analysis is hypothetical and does not determine liability under the laws actually applicable to this incident.
