Recovering Stolen Crypto Assets From Crypto Thieves: The Ultimate How-to Guide

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Since the internet boom in the ‘90s, we have seen technologies evolve. Things that seemed impossible years ago have become a reality; technologies are turning the world into one tiny village. Disruptions have occurred in almost every sector you can think about, and the wind of change is blowing through the financial sector. As the world moves away from cash to wireless payments (think Google, Apple Pay, Stripe, etc.), we have seen increasing adoption of cryptocurrencies. 

Although cryptocurrencies and their associated technologies have achieved increased adoption and global attention in the last decade, a negative cloud is forming. This cloud represents the susceptibility of individuals, crypto exchanges, and DeFi protocols to hacks and malicious attacks. As a result, several crypto investors have lost — and continue to lose — large quantities of their crypto tokens. In the first half of 2021 alone, data from CipherTrace show that losses from crypto thefts, fraud, and hacks amounted to $681 million. In 2020, this figure was $1.9 billion. This year, we have already seen stolen crypto and NFT hacks worth billions of dollars. In April, Ronin Network suffered one of the largest ever crypto hacks, costing $600 million.

Why You Should Be Extra Careful With Your Crypto

Worse still, these hackers can disappear into the comforting hands of anonymity that the internet offers forever. If you have invested in Bitcoin, Ethereum, or other tokens, here are two key truths you must bear in mind: 1) Your investments are a target for hackers and thieves, and 2) Getting back your stolen crypto can be tough — when possible at all. 

While the former is something to keep in mind, the latter proves a daunting challenge. This is because crypto transactions are usually pseudonymous and, most times, irreversible. Thus, they are a popular target for thieves and hackers as it is challenging to put a face to a transaction, making it essentially impossible to trace and reverse criminal transactions.  

If your hackers access your crypto wallet, the chances of you getting your stolen funds are, therefore, very slim. Data from CipherTrace shows that only 20% of stolen cryptocurrencies are ever recovered.

So, what steps can you take to recover your crypto if it is stolen? In this complete step-by-step guide, we delve into the den of thieves. We look at pointers to a possible hack and/or theft, ways in which hackers and thieves operate to steal crypto assets, how you can recover your funds, and how to prevent future breaches. That said, let’s get to it. 

How Do You Know Your Crypto Wallet(s) Have Been Hacked?

Most hackers operate by prowling the internet, looking for weaknesses to exploit. While technological advancements are making crypto wallets more secure than ever, crypto thieves still employ social engineering schemes such as hacks and phishing scams to get their way. 

How then do you know that your wallet has been the subject of a crypto theft? Simple: if you notice unauthorized transactions with your crypto wallet (especially outflows), then a breach has occurred on your wallet. If notifications are set up for incoming or outgoing transactions on your wallet, you may be better placed to spot criminal transactions quickly and nip them in the bud. 

Another pointer to a possible hack are strange transactions on your credit or debit card, especially if you connected them to your wallet. Many crypto thieves stop short of stealing your money, but some take it a step further. 

5 Ways Your Crypto Assets Can Be Stolen

1) Compromised SMS verification Process

 Crypto thieves who use this mode of attack target people who often operate with cryptocurrencies. When you use a centralized exchange (CEX), two-factor authentication is often active on your mobile phone. Usually, the aim of a thief here is to intercept SMS verification from the exchange. This compromise can occur via different means, such as cloning, voice phishing, cloning your SIM card, or wiretapping. Once compromised, they use these SMS codes to “recover” or obtain access to your crypto wallet. 

2) Malware

Malware never gets out of the toolkit of hackers and cyber thieves. Malware infections are still popular among crypto hackers and remain very potent against weakly secured assets. How does malware work? Simple: the hackers infect devices with keyloggers that steal your PINs and passwords. When the legitimate user of a PIN or password enters it into a website, these malware infuse cross-scripting infusions into webpages. The passwords or PINs are then redirected to different malicious websites that your browser often does not notice. These malicious websites either download the ransomware or malware to a hacker’s device or steal your sensitive details. You can read more about malware and ransomware here

3) Phishing Attacks

This is the most popular and arguably effective way crypto thieves operate. With phishing, the potential victim gives access to their vaults by themselves, tricked by forged information that looks like the legitimate emails and authentic websites of cryptocurrency exchanges. Usually, to increase the potency of a phishing attack, the attackers send “confirmation” emails to unsuspecting users. 

These emails contain links that take the users to fake websites where they must input their authentication details. These details are then stolen and used to carry out transactions via the wallet at will. Detecting potential phishing attacks requires you to carefully and attentively check domain spellings (for example, a phishing email may require you to click on a link to opensea.com, although the legitimate website is opensea.io). Also, a Secure Sockets Layer Certificate (that little padlock on the left side of the address bar) must be present before you enter sensitive information. 

SSL certificates used to avert Cases of stolen crypto

4) Stealing Your Secret Keys

Usually, no financial operation(s) occurs with a cryptocurrency without two kinds of private and public keys. Private keys are only available to their holders and validate all transactions an owner carries out. Public keys are used to confirm private ones. Private keys are stored in respective crypto wallets, and if the owner of a wallet loses its private key, the assets are inaccessible forever. By stealing your private key, a thief can transfer all your assets to a different wallet, and you will lose them forever. 

As a result, hackers use every possible method to steal keys, beginning with web browser extensions and other system vulnerabilities. Hot wallets are also lucrative for them as they usually run with CEXs (think Binance or Coinbase wallets). Cold wallets, on the other hand, exist as hardware devices. They are more secure than hot wallets, but the owner loses all their digital assets if lost. 

5) Mobile Applications With Poor Security Infrastructure

Although many crypto asset holders do not know this, not all exchanges and trading applications are secure. This could be a result of security backdoors or poor architecture, making them susceptible to cyberattacks. These platforms are often susceptible to data leakages, such as API keys and users’ sensitive information that may be stored in unencrypted databases. When these attacks occur, the attackers may steal crypto assets stored on these exchanges and applications. 

How to Recover Your Stolen Crypto: Comprehensive Guide 

In the preceding paragraphs, we outlined the pointers to a possible theft, but if the worst happens, can you get back your stolen cryptocurrency? When you hold your hot wallet’s private keys, it is generally impossible to recover stolen cryptocurrency. Digital assets are intended to be used in one-way transactions. Unauthorized transactions involving stolen funds are just as (un)secured as authorized transactions. Safe practices can help to avert future theft.

But don’t give up hope. This guide will explain what you can do if you become a victim of crypto theft and how to avoid becoming a victim in the future.

Why Recovering Stolen Crypto Assets Might Be Difficult

It is extremely unlikely that you will reclaim your stolen cryptocurrency. Theoretically, you can track your stolen crypto by checking transactions on the blockchain, but this isn’t easy in practice due to the system’s anonymity. Additionally, a crypto thief would almost immediately convert the stolen crypto to fiat, using an exchange. 

Yes, most activities leave traces that you may be able to follow to unmask the criminal. Even if you successfully obtain the details via public ledgers, you have very few options to recover your stolen funds because cryptocurrencies are naturally decentralized.

Determine if Recovering The Asset is Worth It

Because recovering stolen crypto assets can be emotionally draining and expensive, it is important to weigh your options before proceeding. It’s up to you whether it is worth the while to get professional help or let go. This is especially true if you haven’t invested a large portion of your funds in crypto.

That said, these 5 tips can help you get back your stolen cryptocurrency: 

Use a Bounty Hunter or Recovery Service 

Some websites allow you to post bounties if you are willing to pay reasonable amounts to get your funds back. A blockchain locator expert will investigate the theft and determine if the funds are recoverable for a given price. Bitcoin Bounty Hunter is a great place to start. However, it is important to note that these services are expensive and often do not provide additional information beyond what is publicly available.

You can also use a blockchain explorer like Blockcypher to track money movement. The site provides the user’s Bitcoin address and looks up the address at Bitcoinwhoswho to find the owner.

Online, you can find a lot of so-called experts with Gmail contact addresses and fake reviews that say they can help or hack your wallet. Our experience is that many are just scammers who prey on the weak and are in a bad situation. Connect with a professional company or expert that has a proven track record in this field.

Contact the Police (Where Applicable)

While official complaints won’t help you recover stolen cryptocurrency, filing some paperwork or having a case number is not a bad idea. You never know if you’ll have an insurance claim or a lawsuit. Evidence showing that you took the theft seriously can help if you need to prove it right. 

P.S: Contacting the authorities may not yield any fruits if your country of residence has outrightly banned cryptocurrencies or does not recognize them as legitimate financial assets. Reporting may prove counterproductive, as this act may get you in hot water with the authorities. 

Contact the Exchange Involved 

If you discover that your cryptocurrency has been stolen due to an attempt to hack your account, you should act immediately. Delaying the tracking process allows hackers to hide their traces by transferring your assets to cold wallets and subsequently to another exchange.

If your crypto exchange is well known, you will likely get help. If you take action quickly, you can freeze your funds on the platform, depending on the stage or level of theft. However, note that exchanges are not obligated to help. Additionally, the governments of some nations do not consider cryptocurrencies an asset, which reduces the likelihood of government support. 

To get across to the exchange, check out the Contact Us page on the exchange’s website. 

Follow the money

In a blockchain, transactions leave trails that can be traced. It’s also quite easy to figure out the thief’s wallet address. You can track the recipient’s address. If thieves try to transfer funds from your account to the exchange, report it to the cryptocurrency exchange immediately. 

Most exchanges require traders to provide Know Your Customer (KYC) details such as address and name before converting or trading cryptocurrency to fiat. Reporting a case can help the exchange track down thieves. This is why reporting to the police is so important.  

Once again, blockchain researchers like Blockcypher can help trace your assets. The website provides the perpetrator’s Bitcoin address, which can be found at www.bitcoinwhoswho.com, to verify the owner.  

However, it is important to remember that this method does not guarantee a return on your money.

Here is a helpful tutorial that can help you recover your stolen cryptocurrencies:

How to recover Coins from a hack

5 Tips To Help Prevent Future Theft

Here are a few tips to prevent the future loss of your crypto assets to thieves: 

Enable multi-factor authentication

First, make sure multi-factor authentication is enabled on your exchanges. Use an authenticator app instead of an SMS. Where it is possible to operate without the SMS authentication option, please turn it off. 

 Set up your encryption account using a different email address and unique password. We recommend creating a new email account that will only be used for cryptocurrency accounts. This reduces the likelihood that your email will be used as a target against you.

Use A Hard or “Cold” Wallet And Spread Assets Across Different Exchanges

Store your cryptocurrencies offline in a “cold or hard wallet.” This involves using online methods to store digital coins offline to minimize the chance of being stolen by hackers. Additionally, several crypto exchanges have recently been the subjects of hacks. Spread your investments across exchanges to reduce the chance of your funds being hacked.

Keep Your Wallets Safe 

The extra layer of security may make it a bit difficult to complete tasks in your wallet, but it is essential to protect your funds from intruders. So, if you own a cryptocurrency wallet, ensure adequate security checks and use them whenever possible. After all, no security measure is out of the question when your valuable crypto assets are at stake.

Improve Your Overall Security Apparatus 

Take the time to improve the overall security of your gadgets to interact with your crypto assets. Learn more about gadget security, antivirus, browser security, 2FA, VPN, and password storage and how you can improve them by using sites like Data Overhaulers and All Things Secured.

Protect Your Remaining Assets

If there are any of your crypto holdings left in your compromised wallet, it goes without saying that you should move them out. Delete such a wallet and get a new one to replace it. Change the passwords and secure codes associated with your account on the affected exchange immediately. Change the email account connected with the account. If there is any reason to believe the device you used to log in to your account is compromised, please reformat the device or, better still, quit using it altogether. 

Final Words…

It sucks to have your hard-earned assets stolen. Worse still, these crypto assets may often be worth thousands or millions of dollars — more than many will ever make in their lifetimes. However, recovering your funds and preventing a recurrence of such are more important. If you follow the tips in this guide, you are unlikely to become a victim of crypto thefts (at least not to devastating proportions). What other option would you recommend to someone who has had their crypto stolen?

Leave a comment with your suggestions; no spam, please. 

Disclaimer

This article is for educational purposes only. We are no financial advisors. The information provided from SmartOptions is for informational purposes only. It should not be considered legal or financial advice. You should consult with a financial advisor or other professional to find out what may be best for your individual needs and risk tolerance.

Please do your own research and never let anyone trade your account for you. We do not support or advertise Fund Management in any kind of manner. We solely review signal providers, their work/analysis/provided education. Please read this disclaimer and leave the website if you disagree with it.

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Chidera Anushiem
Chidera Anushiem
Chidera is an experienced crypto writer who believes in the power of the blockchain to revolutionize our world.