What should you do if your cryptocurrency has been stolen?

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11 December 2020
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Crypto theft – IQeon

The team of the Atlas VPN analytical service conducted a study and found out how much cryptocurrency has been stolen since 2012. Over the past 8 years, hackers have grabbed $13.6 billion from exchanges, personal wallets and decentralized applications!

To protect your savings, experts advise using only reliable storages, avoid entering personal data on suspicious websites and being extremely careful when conducting transactions. However, there are still cases when these rules don’t ensure you from hacking.

Today we will tell you what to do if the scammers still get to your savings.

How do cybercriminals steal cryptocurrency?

It is important to understand that digital assets don’t have a physical form, so it is impossible to steal them in the usual sense. This is only possible when thieves gain access to private keys, which are often weakly encrypted.

So, the most common situation is the crypto theft from online wallets. Some of their developers are more focused on simplicity and usability than security. Therefore, if there are vulnerabilities in the system, your money can easily fall prey for thieves.

In addition, scammers can find a loophole in bitcoin exchanges. Often these services request access to private keys to improve the speed and convenience of operations. If they are hacked, all confidential data – and therefore your bitcoins – immediately go to the attackers. Therefore, it is important to choose exchangers that have been presented on the market for a long time and have a lot of positive customer reviews.

Analysts say that there are still reckless cryptocurrency owners who become victims of social phishing: they receive an email with a link to a website where they need to enter personal data. By going to a fake portal, they literally give their money to the fraudsters themselves.

Due to the trend for a mobile traffic increase, it is worth mentioning that today the danger of theft is more often awaiting crypto owners in instant messengers. Hackers create various kinds of chats and bots, ostensibly "for the convenience of conducting financial transactions." But no matter how good and attractive it sounds, it is better to avoid operations running with the help of such tools without an urgent need.

There are more and more cases when attackers steal money from crypto wallets. Users often rely on the happy-go-lucky attitude or antivirus on the computer. However, scammers act in more and more sophisticated ways: they steal through unprotected Wi-Fi networks, conduct fake ICO, pump and dump altcoins’ prices, infect the PC of cryptocurrency holders with viruses, wiretap telephone conversations and hack social media to find a password, steal flashcards and notes with a private key...

Another common way to steal crypto assets is the well-known financial pyramids. Gullible crypto investors often fall for the "perspective" of investing in a dummy project. Behind the bombastic speeches that every investor is guaranteed to get rich in a matter of months, there are ordinary thieves-manipulators.

 

 

If you are persuaded to invest in a project that has neither a large community, nor publicly available information, nor developed products, this is a  main sign of a financial pyramid. As soon as the influx of users stops, the project will disappear, and your funds won’t be returned.

In 2019-2020, hacker attacks were the most popular method of illegal withdrawal of funds. It is difficult to predict what will happen in 2021.

What to do if you fell victim to cryptocurrency theft?

Step 1. Don't waste time!

The more you panic and lament the theft, the more benefits you give to the scammers.

When your wallet or exchange account has been hacked, you need to immediately transfer bitcoins and other digital assets to cold storage.

We recommend downloading an offline program in advance or purchasing a hardware flashcard so that in case of a cyber threat, you don't waste time creating a reliable wallet. Some members of the crypto community who don’t want to transfer their funds use the service of digital asset mixers.

Cryptocurrency mixer is a tool that provides anonymity when working with virtual money. One needs to send assets to the mixer address which is unique for each user. Coins  are mixed with transactions of other users and distributed among hundreds of wallets within the program. So, the owner of the cryptocurrency gets back "clean" coins, and the manipulations that he made only double back scammers who are trying to track assets.

If your funds are stored on a hacked exchange, contact the support service as soon as possible so that the trading platform staff can freeze your account.

The faster you react to an attack and the more thoughtful the methods you use, the higher the chances to protect the accumulated funds.

Step 2. Record the information

The victim needs to fix all available information about the attacker while the trail is still hot: take screenshots of the website, chat conversation, save any data voiced during the dialogue with the thief, and other details. This information can be very helpful in finding the fraudster.

Step 3. Identify the thief

To demand the return of funds from fraudsters, you should first try to find out who they are and how they acted. Here comes one of the digital assets advantages – the ability to track the way of coins.

For example, if a cryptocurrency was stolen through an exchange, then it will be much easier to determine the owner of the account and wallet. Some trading platforms work with KYC, or the “Know Your Customer” tool. Passing the KYC procedure requires identification. Therefore, in theory, you can file a lawsuit so that the exchange will be forced to disclose the identity of the attacker, and the court would oblige him to return your bitcoins.

However, even if money wasn't stolen from an exchange account, you can still track the movement of funds. The simplest solution is provided by blockchain explorers. With the help of simple manipulations, you can get information about previously committed transactions with a specific bitcoin address, its current balance, amounts passed through it and addresses of incoming and outgoing transactions. Block Explorer website is one of the most well-known services.

You can also try the Crystal solution developed by one of the largest providers of blockchain tools in the world – Bitfury Group. The program analyzes information in the bitcoin blockchain, focusing on the specified addresses and transactions, and also collects data related to the request on specific forums and websites.

Crystal shows the movement of funds up to the withdrawal of cryptocurrency to fiat! Thanks to the operation clustering algorithm, the chance of finding the final assets owner increases to 98%.

Visualization of the funds movement after the Zaif exchange hack in 2018 based on Crystal data. Source: habr.com

Step 4. Get help

There are companies that specialize in investigating cryptocurrency theft and finding missing coins. For example, Chainalysis, which performs complex analysis of data and public keys. The company has worked together with the US Federal Tax Service and Europol for 5 years, helping law enforcement agencies and crypto exchanges in different countries.

Of course, you will have to pay a good deal of money to track down stolen assets, but with serious analytical tools, you can get close to the thief within a short period of time...

Step 5. Team up with other victims

This step is optional since the attack can be targeted. However, by teaming up with other victims who have suffered theft, solving the problem could be much more effective. Mass requests to regulatory entities will have greater impact.

Step 6. File a suit

The best thing to do when you find out a theft is going to court. But it is worth remembering that the situation with virtual money is ambiguous. While in the US there are no problems with the definition of bitcoins as property, in other countries authorities are just beginning to work on assigning a legal status to cryptocurrency.

Find out about the digital assets status in your jurisdiction to see if it is possible to file a claim against a fraudster. Moreover, you can consult a trusted and specialized blockchain lawyer with criminal and civil practice. It is also worth joining forces with cybersecurity specialists, experts in cryptography, who can help to formalize your claims, taking into account the specifics of the situation.

How to protect yourself from cryptocurrency hacks?

Now you know how to recover stolen cryptocurrency. But how can you protect yourself from possible cyber attacks on your money? Sharing tips.

  • Split your funds

Many experts strongly recommend storing cryptocurrency in multiple hot and cold wallets. A hot storage will be a great option for everyday use and keeping a small amount of money. But the vast majority of savings should be kept in a cold wallet that is not connected to the network.

Ledger or Trezor hardware wallets are considered to be the best tools on the market. The world-recognized security of these storages will keep bitcoins and altcoins completely safe.

To find out the full list of the most reliable tools, we suggest you to read our article "The best Ethereum wallets for safe digital assets storage."

  • Be more selective in your choice

Always do mini-research when choosing a token sale, a wallet for saving assets, an exchange, a news resource, a program, and in general – everything.

The right choice of a trading platform where active users of cryptocurrency not only conduct transactions, but also often store large amounts of money plays a huge role.

Before registering, pay attention to the reputation of the exchange and the period of its operation, as well as its rate on CoinMarketCap. In addition, always carefully read the terms of service to know what law applies to resolve disputes, what protection methods are used during attacks, and whether the exchange returns lost money.

Pay attention to the insurance methods used by the trading platform – this is one of the guarantees that your assets won’t go anywhere in case of fraudulent activity.

Coinbase is a good example of how an exchange insures itself and users against risk. The platform documents clearly state that the cryptocurrencies of holders from the United States and the European Union countries are insured. Therefore, in the event of physical intervention by hackers or unscrupulous exchange employees, the insurance will cover all losses of residents of these countries.

In order to avoid force majeure, carefully study all the documents of the trading platform on which you store bitcoins and altcoins. Informed is forearmed.

  • Insure your assets

You can make yourself safe by contacting foreign insurance companies that protect cryptocurrency in various ways. Among them are AXA XL, Chubb, Mitsui Sumitomo Insurance and others. Thanks to crypto insurance, there is a chance to cover losses in the event of theft or trading platform bankruptcy, but it is worthwhile to thoroughly study the conditions of insurance of a particular company, because not every crypto holder can afford it.

  • Use proven security systems

To conduct business with cryptocurrencies, it is advisable to use a separate, reliably protected computer. Install antivirus, use a personal firewall and a high-quality VPN to work on the network.

  • Keep up to date

As they say, if you need a helping hand, you will find one at the end of your arm. In order not to fall into the trap of fraudsters, constantly monitor not only the market situation, but also the methods used by thieves – every year they become more savvy, persistent and cunning. Studying trends will help you be prepared for any kind of attack.

Conclusion

With the growing popularity of digital assets, the volume of cybercrime is also increasing: the annual growth in fraudulent activity is 153%, and the damage from their attacks reaches 3 billion USD!

You can protect yourself from hacker attacks and large loss of funds by being more careful about the choice of cryptocurrency platforms, choosing more complex passwords for digital wallets, using cold storage for long-term savings and constantly monitoring what methods attackers invent to steal your money...

Stay alert!


Disclaimer: IQeon.io employees are not representatives of organizations mentioned in this and other materials as well as in publications on other information channels. Before further interaction with the mentioned services we strongly recommend you to read Terms&Conditions.

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