The Ultimate Guide to Recovering
Cryptocurrency Assets From Crypto Thieves
Since the 1990s internet boom, technology
have advanced. A few years ago, things would have appeared unthinkable, but
thanks to technology, the entire world is becoming a small town. Almost every
industry you can think of has had disruptions, and the financial industry is
seeing a wave of upheaval. Cryptocurrency usage has been rising as the world
shifts from cash to wireless payments (think Google, Apple Pay, Stripe, etc.).
A bad cloud is gathering, despite the fact that cryptocurrencies and the
technology that support them have gained more traction and attention globally
over the past 10 years. This cloud symbolizes the vulnerability of people,
cryptocurrency exchanges, and DeFi protocols to malevolent intrusions and
cyberattacks. Because of this, a number of cryptocurrency investors have lost a
significant amount of their tokens and still do. According to data from Digital Currency Reclaim (DCR) bitcoin
recovery experts, losses from fraud, theft, and cyberattacks totalled $681
million in just the first half of 2021. This amount came to $1.9 billion in
2020. We have already witnessed billion-dollar NFT attacks and stolen
cryptocurrency this year. With a total value of $600 million, Ronin Network
fell victim to one of the biggest cryptocurrency hacks ever in April.
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 gain access to your crypto wallet, the chances of you getting your
stolen funds are, therefore, very slim. In fact, data from investigations shows
that only 20% of stolen cryptocurrencies are ever recovered.
So, what are the steps Digital
Currency Reclaim (DCR) take to recover your
crypto if stolen? In this complete step-by-step guide, we delve into the den of
thieves. We take a look at pointers to a possible hack and/or theft, ways in
which hackers and thieves operate to steal crypto assets, and how you can go
about recovering 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?
The majority of hackers search the internet for vulnerabilities to
exploit. Even while advances in technology have made cryptocurrency wallets
more secure than before, cybercriminals continue to use social engineering
techniques like hacks and phishing scams to get what they want. Therefore, how
are you aware that a cryptocurrency theft has occurred involving your wallet?
It’s simple: your wallet has been compromised if you observe any illicit
transactions (particularly outflows) using it. You can be in a better position
to identify fraudulent transactions fast and stop them in their tracks if you
have alerts set up for incoming
or outgoing transactions on your wallet. 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
Compromised SMS verification Process: Crypto thieves who use this mode of attack specifically
target people who operate with cryptocurrencies a lot. When you use a
centralized exchange (CEX), very often the Two-factor authentication is 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.
Malware: Malware never gets out
of the toolkit of hackers and cyber thieves. Malware infections are still
popular among crypto hackers, and they 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 malwares infuse cross-scripting
infusions into webpages. The passwords or PINs are then redirected to different
malicious websites which are often not noticeable by your browser. These
malicious websites either download the ransomware or malware to a hackers’
device, or they steal your sensitive details. You can read more about malware
and ransomware here.
Phishing Attacks: This is the most popular and arguably the most effective way crypto
thieves operate. With phishing, the potential victim gives access to their
vaults by themselves, tricked by forged information that look 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 would have to 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.
Stealing Your Secret Keys: Usually, no financial operation(s) occurs with a cryptocurrency without
two kinds of keys: private keys and public ones. Private keys are only
available to their holders and they validate all transactions carried out by an
owner. 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 a lucrative
field 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 if lost, the owner loses all their digital
assets.
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 as a result of
security backdoors or poor architecture, making them susceptible to
cyberattacks. Often, these platforms are also susceptible to data leakages such
as API keys and sensitive information of users that may be stored in
unencrypted databases. When these attacks occur, crypto asset stored on these
exchanges and applications may be stolen by the attackers.
5 Tips To Help Prevent Future Theft
Here are a few tips to prevent 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 SMS. Where it is possible
to operate without the SMS authentication option, turn it off. Set up your
encryption account using a different email address and unique password. We
recommend that you create 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 been the subjects of
hacks recently. 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 if you want to protect your funds from
intruders. So, if you own a cryptocurrency wallet, make sure there are adequate
security checks in place, 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 the
gadgets you use to interact with your crypto assets. Learn more about gadget
security and how you can improve it using sites like Data Overhaulers.
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.
As a long-term cryptocurrency investor, you must know these
tips.
When it comes to cryptocurrencies, one of the biggest
challenges for investors is not getting caught up in the hype. Digital
currencies have quickly risen to a place of prominence in the portfolios of
many retail and institutional investors. At the same time, analysts have
continued to caution investors about their volatile nature and
unpredictability.
Don’t put in more than you can afford to lose: Crypto is riskier than many other investments. Nothing is
guaranteed other than volatility. What’s more, it’s unregulated in most cases.
There is no FDIC insurance for this stuff, nor is there a buyer of last resort.
The prices of crypto coins swing wildly from minute to minute. While the market
is basking in the glow of bull run, it has endured painful and protracted
corrections and almost certainly will again. Danger varies in degree. Bitcoin,
the original cryptocurrency, has been around for more than a decade and it’s
significantly less likely to disappear than most other coins. But it’s not free
of risk either. Hence, don’t bet the proverbial farm, or your life savings, on
any coin.
Research thoroughly: Before you invest a significant amount of money in any digital currency,
spend hours upon hours researching the technology so you understand the value
proposition and the risks. Lurk on community forums and developer mailing
lists. Listen to podcasts. Borrow books from the library, not only about
digital currency but related fields like cryptography, game theory, and
economics. Read CoinDesk and even some of our competitors. Go to local meetups,
if your area is no longer on COVID-19 lockdown. Ask lots of questions If you don’t understand what
you’re hearing, don’t be afraid to ask someone to explain. Once you think you’ve researched everything there is to
know, do even more work. You’re probably not done yet.
Resist the fear of missing out: If the only reason you’re investing in something is to
avoid missing out, the only thing you won’t miss out on is losing everything.
Fear of missing out (FOMO) is a sure way to destroy whatever wealth you may
have accumulated over the years. The problem is that it’s a gut reaction to
something that should be researched first. Trading based on your gut will
quickly lead to an upset stomach. Know what you’re buying. Really know it.
Going on a trading app and seeing a currency is up 30% or so over the past 24
hours isn’t research. It could be you’re the unlucky sap being sold a falling
cryptocurrency. Every coin has pumpers (shameless promoters), even bitcoin.
Don’t succumb to peer pressure.
If it sounds too good to be true, it probably is: Much like Wall Street, the U.S. Congress, or the American
Bar Association, crypto is rife with charlatans. There are more than enough
people promising their project will be the one to overtake bitcoin. Some
crypto exchanges offer more than 100x leverage, meaning you can borrow up to
99% of the cost of an investment. This will juice your profits if a coin goes up in value, but if it goes
the other way you could quickly be wiped out.
Don’t trust, verify: Scammers abound in this market. Just this past weekend, some rascals on
Twitter took advantage of Elon Musk’s appearance on television’s “Saturday
Night Live” to defraud people out of US$100,000 worth of various cryptos with a
bogus “giveaway.” Impersonating the comedy show’s Twitter account, the
miscreants instructed their victims to send small amounts of crypto to verify
their addresses. If they did so they would get 10 times the amount back. That
too-good-to-be-true proposition was a red flag.
Beware of ‘unit bias’: Just because a coin is trading around $1 does not mean it’s “cheaper”
than bitcoin at US$58,000. Not all coins are created equal. There are literally
thousands of cryptocurrencies, some of which seek to emulate bitcoin and some
of which try to solve other issues. They all have varying levels of developer
support and decentralization. Determining the value of a coin means asking how
and why was the coin created. Crucially, what is the coin’s security model –
proof-of-work, proof-of-stake, or something else? If it’s the former, how does
the hash rate compare to other Pow coins? If you don’t know what these terms
mean, you’re not ready to invest.
Not your keys, not your coins: Cryptocurrency is a bearer asset like cash or jewellery,
meaning the holder is presumed to be the rightful owner. Once it’s lost or
stolen it’s gone. That is why advanced users will advise you not to entrust the
cryptographic keys to a digital currency wallet to a third party, such as an
exchange, because these firms are largely unregulated in many places and may be
subject to hacks or exit scams. Decentralized finance (Defi) platforms have
fallen prey to numerous high-profile exploits over the past 10 months, and
centralized platforms like Binance have been subject to their fair share as
well.
You can buy a fraction of a bitcoin (and most other
cryptos): You don’t need to buy a whole coin.
Bitcoin, for example, is divisible to the eighth decimal. So, if you’re curious
about how this stuff works, you can purchase as little as US$10 worth and just
play around with it. As billionaire Mark Cuban recently said on television of
buying small amounts of dogecoin, “it’s a whole lot better than a lottery
ticket.” Unfortunately, he also encouraged viewers to spend doge on merchandise
without mentioning the tax implications (see below).
Understand the tax consequences: This is especially important in the U.S., for several
reasons. First, the Internal Revenue Service (IRS) considers crypto property,
not currency, for tax purposes. The upshot is if you buy a coin for US$1 and it
doubles in value and you spend that extra dollar to buy so much as a
pack of chewing gum, you are required to report that capital gain and pay tax
on it. There is no “de minims exemption,” despite the crypto industry’s
lobbying efforts. Also, centralized exchanges regularly send account
information to the IRS. Sure, crypto isn’t as regulated like stocks or banks.
However, the federal government is running a massive deficit and it won’t think
twice about sending in folks with mirrored aviator glasses to visit you to ask
about your crypto trades.
Purchase using dollar-cost averaging and don’t obsess about
price: Go outside. Get some fresh air,
exercise, and sunshine. Spend time with your family. You can do all that AND
invest in crypto. The markets will fluctuate from day to day, hour to hour,
minute to minute, but any crypto worth a damn, any investment of any kind worth
a damn, is a long-term bet. If you want a dopamine hit, go for a run or watch
an action movie.
