Electrum, one of Bitcoin’s oldest software wallets, published a security advisory on Saturday describing a weakness that attackers were already abusing.

TL;DR

  • A bug in the Electrumbitcoin wallet let malicious servers slip fake pending payments into users’ transaction history.
  • Users who tried to speed up a stuck payment with Replace-by-Fee could end up signing coins over to the attacker.
  • At least one user lost funds. Electrum released version 4.8.3 on October 24, and the amount stolen remains undisclosed.
  • Users connected only to servers they trust, including their own, were not exposed.

The Wallet Allowed Fake Pending Payments

The developers had received two reports during October. One came from a user who lost money after approving what looked like an ordinary fee increase.

The issue lies in how the wallet handles payments that the network has not yet confirmed. Unlike a full Bitcoin node, Electrum depends on outside servers to supply transaction histories and relay payments. Before the patch, it accepted those servers’ reports about pending transactions without checking their signatures.

An attacker running one of those servers could catch a payment before it reached the Bitcoin network. The server then swapped it, inside the wallet’s history, for a counterfeit transaction that sent the user’s coins to an address the attacker controlled. The counterfeit carried invalid signatures, yet Electrum failed to notice.

The wallet displayed the fake as a pending payment. Nothing had been stolen at that point; the trap closed only when the user tried to speed things up. Bitcoin lets senders replace an unconfirmed payment with a higher-fee version, a feature known as Replace-by-Fee. If the user chose it, Electrum could pick up the fraudulent transaction and sign a valid replacement that delivered the coins to the thief.

Signs Of A Careful Attacker

Some details suggest a deliberate operation. In one reported case, the planted transaction included no fee whatsoever, which made it look stuck and nudged the user toward a fee bump. Attackers also generated receiving addresses whose final four characters matched the legitimate destination, making the swap easy to miss during a quick glance.

Timeline Of The Reports

The first report arrived on October 11 from a user with a two-of-three multisignature wallet secured by two Trezor hardware devices. That person had verified the genuine payment on both devices, then later spotted an unfamiliar outgoing transaction in the wallet’s history.

A second user reported on October 18 that they had raised the fee on a substituted transaction and lost money. The developers have not shared how much was taken, nor have they named the servers involved.

Electrum shipped version 4.8.3 on October 24. It adds signature checks for unconfirmed transactions that spend coins from the user’s own wallet. The fix landed six days after the report that involved stolen funds.

Older tech releases remain open to the attack whenever they connect to a malicious server. The developers say people who used only servers they trust, including servers they run themselves, were not affected.

What Should Users Do

The advice from the team is straightforward: upgrade to the latest version, and verify the receiving address and amount before signing any payment, including a fee increase. Checking the full address rather than just the beginning or end matters here, given the lookalike addresses reported.