🏆How To Recover Stolen Cryptocurrency
BY DANNY COIN
Last updated
BY DANNY COIN
Last updated
Bitcoin and other digital currencies are a priority target of cybercriminals, considering the virtual asset’s borderless and permissionless nature.
While cryptocurrency has been around since the 1980s, it gained a significant boom with the launch of Bitcoin in 2008. Since then, there have been hundreds of reported cases of stolen crypto.
Fortunately, recovering stolen cryptocurrency is possible, but the process depends on several influencing factors, is often complex, and can take time.
We’ve put together this article to explore practical methods to recover crypto assets, the ways these scammers steal your assets, and preventative measures you can take to protect your virtual assets from theft.
Digital currencies stolen through fraudulent activity, by gaining unauthorized access, or due to an exposed seed phrase can be recovered. Here are some popular approaches to recovering stolen digital currency.
While it’s impossible to reverse any transaction initiated on the blockchain, the digital currency platform can be contacted to track the person behind this act and freeze their account to reclaim lost funds.
Tracking these digital assets involves using a blockchain explorer to follow where your funds are transferred.
If your crypto wallet is linked with a crypto exchange, it can assist in recovering the funds or let you know about the perpetrator, as most exchanges and brokerages require know-your-customer documentation containing relevant information on the prospective cyber-criminal.
However, most cryptocurrency exchanges outside the USA don’t require KYC documents, making it virtually impossible to track transactions.
A crypto-hunting service can track stolen digital currency using different seed phrases and passwords. Bounty hunters typically charge a percentage of the recovered amount.
Losing crypto assets commonly refers to when the investor forgets or doesn’t have access to their wallet’s seed phrase, making their assets inaccessible. While you can always track the wallet address using a digital currency explorer, having the seed phrase is necessary to gain access.
There are two standard methods used for this problem. The first is hiring a hunting service with trained algorithms and AI-powered devices to run hundreds of random seed phrases to figure out the seed phrase.
The hunters gather information from the user and run their program based on this information.
While there is no guarantee that the account will be recovered, there is a chance of recovering your crypto if enough time is spent running the software. It is a balance between the cost to run the algorithms and the value of your assets.
Another popular method is to extract data from the physical drive to recover the seed phrase. This is a feasible step for people who have accidentally deleted their crypto wallet, the seed phrase or had their files corrupted by a virus. Users can either download reliable file recovery software or hire a professional to carry out the process.
Digital currencies like Bitcoin, Ethereum, and several others are based on a decentralized blockchain where miners are responsible for processing, validating, and verifying transactions.
Due to the virtual asset’s decentralized nature, contacting a sole authority to report the incident is impossible.
These digital currencies are linked to a wallet and can be accessed via private keys. These keys are similar to a password containing unique characters to keep the assets only accessible to the password bearer. It’s the account holder’s responsibility to keep these private keys secure because losing or getting them stolen can make the account holder lose their investment.
This lack of accountability and being unable to be tracked are other reasons most financial institutions hesitate to adopt the system.
While holding currency in a bank or any other financial institution is regulated and backed up by comprehensive policies, cryptocurrency is not based on any of the insurance policies used by the finance industry.
Several financial institutions around the globe are constantly working on incorporating crypto, bringing it to the mainstream, and drafting regulations to aid cryptocurrency service providers.
Let’s look at some common ways cryptocurrencies are stolen:
Most digital currencies have a seed and a recovery phrase as the password. The unique seed phrase is used to access the wallet and recover the associated digital currency account.
If the account holder loses their seed phrase, they cannot access their wallet and transact.
People with a non-custodial wallet don’t realize the necessity of storing their seed phrase and might forget, leaving them unable to access their accounts. Writing down the seed phrase in a notebook or using another method to keep it safe is always advised.
Each digital currency user has a private key to transfer funds and carry out transactions between wallets.
These long keys contain unique characters that can sometimes be mistyped, resulting in a transfer to the wrong crypto wallet. If the transaction is made, it’s impossible to recover the funds unless you already know the user and they have agreed to return the transferred virtual assets.
Although a level of risk is associated with non-custodial crypto accounts, these accounts are still considered the safest digital currency option.
Despite the availability of several exchanges providing features to store and trade crypto, most people don’t trust them as there have been several reported incidents in the past where these crypto exchanges have either disappeared without paying their user base back or have been hacked, resulting in a loss.
While there’s always a chance of getting scammed or hacked, there are various steps you can follow to protect your cryptocurrency.
Although it’s easier to store your seed phrase in a digital location or use a sophisticated password manager, always write this crucial information on paper and store it somewhere safe. Furthermore, make several copies of the credentials, ensuring you can access the seed phrase at several locations.
Considering the intensity of cyber attacks and online scams, two-factor authentication is now a standard protocol many industries, including cryptocurrency, follow.
The mechanism sends a time-sensitive authentication code the user must type in when logging in to their wallet. The code is either sent via email, through an authenticator app, SMS, e-mail, or a phone call.
Unfortunately, in some cases, hackers have used malicious ways of gaining access to users’ devices and can even gain access to email or mobile phones to bypass this authentication protocol.
The best way to get your authentication code is through an authenticator app. When using the app, please remember to keep the login credentials different in case a hacker gets access to your mobile phone.
Instead of registering through an email address that you are already using, it’s best to create a new one when creating your digital currency wallet.
Making a new email address and using it strictly for cryptocurrency reduces the chances of getting affected by phishing emails and potential hacks.
Information related to your crypto wallet should be best kept to yourself. For example, if you are not careful with keeping your wallet’s seed phrase secure and only accessible to you, the chances of the funds getting stolen increase.
Avoid talking about owning crypto, especially in public places or social media networks, as scammers always search for their next victim.
People aiming to keep their funds secure can consider purchasing a hardware wallet. These wallets provide the ultimate protection and security. Also known as cold wallets, these physical storage devices look like a USB flash drive or a portable hard drive.
Cold storage wallets must be connected to the computer before you can transfer the funds. The private key and the physical device are not connected to the internet, reducing the chances of any threat.
If you are interested in investing in the crypto industry or already have a digital currency investment portfolio, splitting these digital assets and keeping them in several crypto wallets is practical.
Doing this decreases the chances of losing all the assets if any issue occurs. In these unfortunate circumstances, losing a small percentage of the investment is more bearable than losing it all.
With increasing issues of crypto scams, many cryptocurrency exchanges have revised their policies and are working with governments across the globe to regularize this digital asset.
Many exchanges have increased their security measures to keep their customers’ investments safe to facilitate them and improve security. If you prefer using an exchange, research before opting for an exchange and check the reviews to make an informed decision.
Although the crypto industry is massive, there are risks like the market being extremely volatile, partially regulated, and without maximum security. Fortunately, steps are being taken at every level to protect these investments and potentially recover inaccessible funds.
Crypto hunting and data recovery are already in action, and it’s only a matter of time before more sophisticated tools will be available to recover stolen or lost digital assets.
