Cryptocurrency is a great way to diversify your investment portfolio and take part in evolving technology that’s paving the way for the future of commerce. Yet, stolen cryptocurrency has become an increasingly expensive problem.
It’s estimated that US$3.8 billion worth of cryptocurrency was stolen in 2022, an increase from $3.3 billion in 2021. Both years are a substantial jump from $500 million in 2020 — it’s clear cyber criminals have flocked to the potential of crypto theft.
A significant contribution to total thefts was the recent surge of hacks targeted decentralized finance (DeFi) institutions, exploiting vulnerabilities in the smart contracts to make millions.
However, the billions of stolen crypto also include crypto holders who were targeted by various tactics, with the hacker walking away with the target’s entire portfolio.
It’s become entirely too common for new and veteran crypto users alike to be the victim of a hack or scam. If that happens, what can you do to reclaim crypto?
The Importance of Securing Your Cryptocurrency Assets
Cryptocurrency is substantially different from government-issued currency, known as fiat currency, in many ways. One of these differences is that you’re responsible for securing your investments rather than relying on a bank to keep your funds safe. Additionally, all cryptocurrency transactions are irreversible, so even custodial wallets and exchanges can’t simply press ‘undo’ if a hacker takes your funds.
As a result, you may fall victim to any number of scams and hacks if you fail to protect your crypto adequately. Then, you’ll have to focus on crypto asset recovery and hope you can track down and reclaim your stolen coins.
However, securing your cryptocurrency assets doesn’t require a cybersecurity degree — you can stay protected against most types of attacks by following a few simple tips:
- Protect your keys: Never share your recovery seed phrase or private keys with anyone; don’t store them anywhere someone might easily access them. If you store them digitally, make sure it’s encrypted.
- Learn to spot common scams: Some of the most frequent ways people lose crypto are through scams rather than any type of hacking.
- Be wary of anything too good to be true. Anything promising high returns on your investment is likely a scam.
- Don’t trust random messages on social media or Discord.
- If you’re minting NFTs, triple-check the URL in your browser before connecting your wallet.
- Only use trusted services: There are seemingly endless exchanges and wallet apps to consider. Research any new company and only use exchanges and wallet apps from those with an excellent reputation. Research any new app or service thoroughly before sending them your crypto.
There are certainly more ways to protect your cryptocurrency, and the above tips will go far in protecting you against some of the most common scams and hacks. We can dive deeper into possible attacks to see how these methods are used.
Common Methods Used by Hackers
Before we dive into cryptocurrency scam recovery, how are crypto assets stolen in the first place? Some of the common ways hackers steal cryptocurrency are:
- Phishing scams: There are a variety of phishing scams targeting crypto users, and all of them can empty your wallet. For example, a phishing scam might set up a cloned website of a popular service, then use email or social media to fake the link. If you don’t notice, you might send crypto to the fake site or connect your wallet and lose your assets. Avoid this by triple-checking the URLs and verifying the authenticity of social accounts.
- Malware: Everything ranging from fake apps to software installed without your knowledge can risk losing crypto. You might install a new wallet app that seems reputable at first glance from the Play Store, only to send your crypto to a non-existent company. Be careful what you click on when browsing crypto sites, and only install apps with a proven reputation.
- Social engineering: You might be directly involved in helping scammers or hackers steal your crypto via social engineering. This attack method relies on convincing you to transfer crypto, give up your private keys, or invest in a fake opportunity, to name a few. Don’t trust anyone calling, texting, or DMing you about crypto — assume they’re trying to manipulate you.
You can see how securing your assets protects against these methods. Take the extra time before any transaction or installation to make sure you’re not being targeted by any of the above methods.
How to Recover Stolen Cryptocurrency
Someone’s stolen your cryptocurrency — what do you do next? Thefts can look substantially different from each other, which means the specific recovery process is often unique to the situation.
However, we can still break down the typical workflow to give you an idea of the recovery process. Let’s discuss the specific steps involved in recovering your stolen assets.
Report the Theft
You need to report the theft, but you might ask how to report stolen cryptocurrency? Start by contacting your local law enforcement agency to file an incident report. You’ll likely find out they’re not equipped to try to solve the case, but having an official report on file may end up being necessary in the future.
Then, depending on the nature of the theft, you’ll need to notify any involved companies, such as custodial wallets or exchanges. Many of these companies have direct lines for these complaints; otherwise, you can contact customer support. They may not be able to recover your coins, but reporting the theft further documents the concern and may keep other users protected.
Change Login Details
If the theft occurred on any crypto service with a user account, change your password and username if possible.
Changing your login credentials to other user accounts you believe the cyber criminal may know about, such as your email address password, is worth changing. Make sure to use different, secure passwords as you update different user accounts.
Preventing the attacker from reaccessing your account or accessing any other accounts can go far in minimizing the impact.
Follow Blockchain Movement (Optional)
If you’re trying to reclaim your coins by yourself, you’ll need to navigate blockchain data to understand how your coins are being moved.
In a perfect world, you’ll be able to find identifiable information about the criminal, then work with a lawyer and law enforcement to recover your funds. However, it’s rarely that straightforward.
You’ll likely need to bring in the experts to follow the blockchain movement and connect them to the parties involved in the theft. For most people, bringing in specialists is the best way to recover your crypto.
Work With an Expert
You’ll need to hire experts to fully recover stolen goods for most thefts, as legal processes or law enforcement will likely be involved.
Working with a specialized company like Lionsgate gives you access to a team of blockchain analysts, cybersecurity analysts, and legal experts to track activity and take action to reclaim what was stolen.
Our typical recovery workflow involves the following steps:
- Start with a consultation call: One of our recovery experts discuss your case to learn the ins and outs of your unique situation. We’ll learn all the involved assets and how the theft occurred. We’ll quote the cost of services before moving forward, and a senior analyst will also review your case to ensure we’re equipped to recover your coins.
- Create a resolution plan: Equipped with all the information you provided. We’ll start analyzing blockchain data and conducting open-source intelligence. We’ll strive to identify the parties involved with the theft.
- Explore legal options: Once we have enough information, our legal teams become involved and evaluate the situation. They’ll reach out to you to discuss legal options for recovering the assets.
- Reach out to the holder or authorities: Depending on the situation and your decision, we may reach out to the person holding your cryptocurrency or relevant authorities. Exactly how this step looks varies for everyone.
- Secure the best settlement: We’ll work with all involved parties to get the best possible settlement on your stolen crypto.
You can see how handling the above process alone is extremely challenging and may not even be possible. Even if you can connect the theft to an individual, you’ll need the proper legal counsel knowledgeable in cryptocurrency to help fully recover your funds. For most, the best chance of recovery is hiring the experts.
How Do I Avoid My Virtual Currency Being Stolen in the Future?
Now you know more about common scams and the recovery process — but how can you avoid having your crypto stolen again? Or prevent any theft in the first place?
In addition to the tips we discussed earlier, let’s explore more effective yet simple ways to stay safe.
Don’t Talk About Your Holdings
It’s common knowledge not to tell people how much fiat currency you have in your savings account or how much cash is in your wallet. But some people forget to apply this same practice to cryptocurrency.
Don’t tell anyone about how much crypto you hold or even what cryptos you hold. You will attract the wrong kind of attention if you tweet a screenshot of your wallet with $200,000 worth of Ether.
This same principle applies to publicizing and connecting your wallet address with your real identity. Most blockchains are only pseudo-anonymous, and that’s because of separating your identity from your wallet address. Connecting those dots makes you a much easier target for scammers and hackers.
You can avoid becoming targeted by being careful about what information you share online and even with people in your personal life.
Use Multi-Factor Authentication (MFA)
Most exchanges and custodial wallets offer MFA, with some even enforcing it. MFA adds one or more authentication factors before you can log in, typically a security code sent to your email or mobile device.
MFA is a simple and effective way to bolster the security of your accounts, making it significantly more difficult for a cyber attacker to log in to your account — even if they have your password. Setting up MFA only takes a minute or two; protecting your crypto assets is well worth the time.
Spread Out Your Assets
Avoid the mistake of keeping everything in a single wallet. It’s easy to create new wallets, have them store some of your holdings, and minimize the damage if one wallet is compromised.
For example, Metamask can hold a ton of web3 chains and assets, but if it’s all on one address, all it takes is one mistake to lose everything. Fortunately, Metamask allows you to easily create new addresses so you don’t lose all your web3 assets if one is compromised.
This same principle applies to any crypto asset, even Bitcoin, as creating new wallets for different uses is easy. Many seasoned crypto investors take it further and buy a hardware wallet for long-term holdings. A hardware wallet provides an extra layer of security, making it necessary to possess the device to transfer coins physically.
Need to Reclaim Crypto? Let Lionsgate Help Recovery Your Coins
Losing your investment because of a scam can be devastating, but it doesn’t have to be the end of the story. Just like any other crime, tracking down the perpetrator and reclaiming your lost funds is possible.
Successfully recovering stolen cryptocurrency relies on expert knowledge of blockchain technology, cyber intelligence, and legal processes in multiple jurisdictions. It may be daunting for an individual to undertake this process, but bringing in the experts makes it much more likely to reclaim your cryptocurrency.
Lionsgate is an industry-leading crypto recovery agency with a track record of helping individuals and businesses recover assets on a wide range of blockchains and platforms.
Have you lost cryptocurrency due to a scam or hack? Reach out to us today to talk to a recovery expert and discover how we can help you recover your lost crypto.