The biggest crypto losses come from lost passwords and keys, not from bad price calls: roughly 20% of all bitcoin is estimated to be lost for good. At Bitcoin’s price of $80,028 on October 26, 2026, the two most famous cases, Stefan Thomas’s locked drive (7,002 BTC, about 560 million) and James Howells’s discarded hard drive (8,000 BTC, about 640 million), are worth more than most people will earn in a lifetime. Here are 13 cautionary cases and the lessons they share.
Welcome to Alux.com, the place where future billionaires come to get inspired. If you are not subscribed yet, you are missing out. Prefer video? Watch the original version of this article:
The cases at a glance
| # | Case | What happened | Scale |
|---|---|---|---|
| 1 | Stefan Thomas | Forgot the password to an encrypted drive | 7,002 BTC (about 560 million today) |
| 2 | James Howells | Threw away a hard drive in 2013 | 8,000 BTC (about 640 million today) |
| 3 | Mt. Gox customers | Exchange collapsed in 2014 | Hundreds of thousands of BTC |
| 4 | Terra and LUNA holders | Stablecoin collapsed in May 2022 | Almost $45 billion in market value |
| 5 | Bybit | Exchange hacked in February 2025 | About $1.5 billion in assets |
| 6 | Chris Larsen | Paper wealth fell with XRP | About $59 billion estimated in January 2018 |
| 7 | Tesla and Elon Musk | Bought $1.5 billion of BTC in 2021 | A twist: it was profitable |
| 8 | David Stubley | Phished | 83 BTC (about 6.6 million today) |
| 9 | Mark Frauenfelder | Lost his PIN, then recovered it | 7.4 BTC (about $592,000 today) |
| 10 | Amily | Deleted a key file | 10 BTC (about $800,000 today) |
| 11 | Peter McCormack | Over-ambitious and overspent | About $1.2 million |
| 12 | A German victim | Fell for a fake Elon Musk tweet | About $500,000 |
| 13 | Derek Rose | Borrowed-money bets on altcoins | About $10 million |
Today’s dollar values are our own arithmetic: coin count times Bitcoin’s closing price of $80,027.89 on October 26, 2026. The coins were worth far less or more at the time of the loss.
1. Stefan Thomas: 7,002 bitcoin behind a forgotten password
The programmer Stefan Thomas stored 7,002 bitcoin on an IronKey encrypted drive, which allows 10 password guesses before it erases itself. He lost the password in 2012 and has used 8 of the 10 attempts. As of mid-2026, no recovery has been confirmed. At today’s price the coins are worth about 560 million. The manufacturer has said there is no backup password.
The lesson is simple: write down your recovery details, store them in more than one safe place, and test them.
2. James Howells: 8,000 bitcoin in a landfill
In 2013, the Welsh computer engineer mistakenly disposed of a hard drive holding the private key for 8,000 bitcoin. It ended up in the Docksway landfill in Newport, Wales. Howells has assembled a team of specialists and funding to dig for it, but the local council has refused permission, citing the condition of the device and health concerns. At today’s price the coins are worth about 640 million.
3. Mt. Gox customers: when the biggest exchange vanished
By early 2014 Mt. Gox handled over 70% of the world’s bitcoin trades. In February 2014 it suspended trading and filed for bankruptcy protection after the loss of hundreds of thousands of bitcoin. About 200,000 bitcoin have since been found. The case is the origin of the saying “not your keys, not your coins.”
4. Terra and LUNA holders: $45 billion in a week
In May 2022 the algorithmic stablecoin TerraUSD lost its peg and the LUNA token collapsed, wiping out almost $45 billion in market capitalization within a week. The Terra company filed for bankruptcy in January 2024. The lesson is to be wary of any promised yield that nobody can explain.
5. Bybit: the largest crypto theft on record
On February 21, 2025, the exchange Bybit announced it had been hacked. About 400,000 ether, valued near $1.4 to 1.5 billion, were stolen, the biggest exchange hack to date. Bybit said it replenished its reserves within 72 hours through emergency funding. Even the largest platforms are targets, so do not keep more on an exchange than you can afford to lose.
6. Chris Larsen: when paper wealth shrinks
The Ripple co-founder was estimated at $59 billion on January 4, 2018, briefly putting him ahead of Mark Zuckerberg on the rich list. The XRP token has not held that level. It traded at $1.28 on October 26, 2026. Larsen’s losses were on paper and did not threaten him, but they show how quickly a fortune built on one token can move.
7. Tesla and Elon Musk: a loss that was not
In early 2021 Tesla bought $1.5 billion of bitcoin and briefly accepted it as payment for cars. After 49 days it stopped, citing environmental concerns. The headlines said Musk lost billions as Tesla’s share price fell. The twist: Tesla earned more profit from the 2021 bitcoin investment than from selling cars in 2020. Context matters, and the same coin can be a loss or a win depending on when you sell.
8. David Stubley: phished out of 83 bitcoin
The founder of the cyber-security firm 7 Elements reportedly clicked a phishing link in 2017, and thieves took 83 of his 84 bitcoin, worth about $475,000 then. The same coins would be worth about 6.6 million today. Even security professionals get caught, so verify links and use a hardware wallet.
9. Mark Frauenfelder: lost it, then got it back
The Boing Boing co-owner reportedly wrote his passphrase and PIN on an orange piece of paper, which the housekeeping service threw away. He stored 7.4 bitcoin on a Trezor hardware wallet and, after a long effort, reportedly recovered his PIN and passphrase through a flaw in an older firmware version. Not everyone is that lucky. Today those 7.4 bitcoin are worth about $592,000.
10. Amily: ten bitcoin in a deleted folder
All we know about Amily is that she kept the key files for 10 bitcoin in a folder and deleted it by accident. She lost about $120,000 at the time, and about $800,000 at today’s price. Back up key files, in two places.
11. Peter McCormack: too much, too soon
McCormack’s London advertising agency folded, and he turned to bitcoin with a dream of buying his local football club. As the coins rose he spent the gains as fast as they came, and when the bubble burst he lost about $1.2 million. He reportedly bounced back and now runs a podcast. Spending paper profit is a classic way to lose it.
12. A German victim: a fake Musk tweet
A German man reportedly lost about $500,000 of bitcoin after believing a tweet from a Musk impersonator promising to double his money, with a countdown clock adding urgency. Giveaways that ask you to send crypto first are always scams. In our video on the companies that hold the most bitcoin we tell the story:
13. Derek Rose: when borrowed bets work, then do not
Derek Rose turned $70,000 into nearly $3 million by placing bets with borrowed money on EOS and Iota. He then cashed in and took a bigger risk, and lost about $10 million by his own telling. He said he wanted no pity and plans to try again with more knowledge. Borrowed money multiplies both outcomes.
Another early believer
Gemini founders Tyler and Cameron Winklevoss are among the best-known early crypto investors. Their story, and why bitcoin’s swings matter even to people with deep pockets, is in our video:
What do these stories teach?
First, loss of access beats price loss: around 20% of all bitcoin is estimated to be lost. Second, back up keys and passphrases in more than one place. Third, assume any urgent offer is a scam. Fourth, never bet borrowed money you cannot afford to lose. Fifth, do not keep more on an exchange than you can afford to lose. This is education, not financial advice.
If these stories have made you skeptical, read 10 Biggest Misconceptions About Bitcoin.
Keep reading
- 10 biggest misconceptions about bitcoin: separate the myths from the facts.
- 15 rules of money: the basics that protect you.
- 15 dumb ways to spend your money: more things to avoid.
FAQ
How many bitcoin are lost forever?
Around 20% of all bitcoin is estimated to be lost, mostly because private keys were discarded or forgotten.
How much is Stefan Thomas’s locked bitcoin worth?
He holds 7,002 BTC on an IronKey drive. At $80,028 per bitcoin on October 26, 2026, that is about $560 million.
What happened to James Howells’s hard drive?
In 2013 he mistakenly threw away a drive with the private key for 8,000 bitcoin. It is believed to be in a Newport, Wales landfill, and the council has refused permission to dig.
What was the largest crypto theft?
The February 2025 Bybit exchange hack, in which about 400,000 ether worth near $1.4 billion was stolen.
Did Tesla lose money on bitcoin?
Tesla bought $1.5 billion of bitcoin in 2021. It reportedly earned more profit from that investment in 2021 than from car sales profit in 2020.
How can I avoid losing my crypto?
Back up your keys in more than one safe place, use hardware wallets, verify links, avoid borrowing to trade, and treat any urgent giveaway as a scam.
Last updated: October 2026.
