Cryptocurrency is generally deemed as pretty secure, but sometimes things do happen. We’ll be looking at the top ways to recover stolen cryptocurrency, and how to avoid going through something so traumatic in the first place!
Act as quickly as possible
Benjamin Sauter, a partner at Kobre & Kim, a law and an expert in crypto theft cases, told us, “The quicker you can act, the better,”.
The longer you wait to start tracing your crypto, the more time you give thieves to transfer your assets to cold storage, send them to sketchy exchanges, or to tumblers to mix them up. “The more sophisticated you are, and the less sophisticated the thieves are at laundering the assets, the better chance you have,” Sauter continued.
If the funds are in an exchange, you’ll need to contact them and ask them to freeze your assets.
This will buy you some time. Unfortunately, not all exchanges will comply so you may need to get a lawyer involved to throw their weight around and convince a court to order an issue for them to be frozen.
For the legal system to actually work in your favour, you’ll likely need to know who stole your cryptocurrency.
While you may be able to freeze funds against a John Doe, it’ll be challenging.
According to Marc Jones, a partner at Stewarts Law in the UK, “In general, to enforce an order requiring fraudsters to pay damages or handover stolen property, ultimately you’ll need to know who they are.”
Thankfully, one of the many benefits of cryptocurrency is that you can see where the coins have gone.
If they go through an exchange, you’ll most likely be able to find out who the wallet holder is thanks to the KYC process. From there, you can get a court order to reveal the thief’s identity and recover your stolen crypto.
Recovering lost crypto from a cold wallet
Cold wallets are offline wallets that are designed for storing cryptocurrencies. With cold storage, the digital wallet is stored on a platform without internet connectivity.
This protects the wallet from cyber hacks, unauthorized access, and other vulnerabilities that could be exploited if they were connected to the internet.
There are a number of different ways that you can recover from cold wallets:
Encrypted phones and laptops work like cold wallets, so that you can safely store and access your private key information. Like cold wallets, you can retrieve lost information through professional help.
If you have a paper wallet, consider storing it in a vault or safety deposit box. That way, you’ll literally have a physical backup of your key information. This is a pretty old fashioned way of doing things, so maybe consider other options first.
Pen Drives/Hard Drives:
While this is a very secure way to store your coins, retrieving your data from them should they be damaged or corrupted is a timely and expensive process. You’ll definitely need a professional to do this.
Coinfirm is teaming up with global investigations firm Kroll, to launch a joint initiative called ReclaimCrypto.
ReclaimCrypto combines the latest blockchain forensic techniques with the world of legal investigation and asset recovery. Pawel Kuskowski, CEO of Coinfirm told Coindesk:
“So far, there is no one place where victims can go and get help. It’s almost like they are pleading to get someone interested in their case.
In the end, they have to work it out themselves; see about getting a lawyer, perhaps in some other jurisdictions.”
ReclaimCrypto aims to help in the recovery of stolen cryptocurrency. You can submit an initial form with the data about your stolen coins, and ReclaimCrypto will do an assessment. You’ll only be charged a success fee on the crypto they recover for you, not for the initial assessment!
How to protect yourself
Now that we’ve looked at the top ways to recover your lost or stolen crypto, you’re probably asking yourself how you can protect yourself against those scenarios.
First off, consider dividing your assets into “cold” and “hot” wallets. The cold wallet should store the bulk of your funds, while you use the hot wallet for everyday transactions. Always make sure to keep your private keys secure, and consider using a multi-signature wallet.