Last updated on June 18th, 2024 at 08:02 am
If you’ve fallen victim to a crypto scam, experienced a wallet breach, or lost access to your private keys, you probably know that recovering your crypto assets can be an almost impossible ambition. This challenge primarily aleerises from the inherent nature of cryptocurrencies, as they are designed to be decentralized and relatively anonymous.
While traditional banks can freeze accounts or reverse transactions, the immutable nature of blockchain renders such asset recovery methods nearly impossible.
The good news, however, is that there are methods and tools available to enhance your prospects of reclaiming your crypto assets. In this article, we will discuss some of these tools and best practices for the entire process.
Tools for Crypto Asset Recovery
Crypto asset recovery is not a walk in the park, but using these tools, either individually or in combination, simplifies the process and increases the likelihood of success.
Blockchain Explorers
Blockchain explorers play a vital role in cryptocurrency space by fostering transparency, accountability, and enabling retrieval of misplaced or stolen funds. These free tools are indispensable for tracking transactions and monitoring blockchains. They provide real-time information regarding transaction histories, wallet balances, and more.
Examples include Etherscan and Blockchain.com.
Their high level of transparency and access to blockchain data has been instrumental in building cases against wrongdoers and reclaiming a substantial portion of stolen funds.
Crypto Forensic Services
While blockchain explorers are highly useful, they become even more effective when combined with specialized crypto forensic services like Chainalysis and CipherTrace. These services use advanced methods to dive deep into blockchain transactions and offer critical assistance in resolving complex cases.
A case in point is the 2018 Coincheck hack, which resulted in the theft of an estimated $530 million in NEM tokens. In this instance, crypto forensic experts were able to carefully study the complicated network of transactions involved in the hack and track the movement of the stolen tokens.
They were able to identify the wallets and exchanges used by the hackers to hide the funds. This information proved to be crucial for both law enforcement and victims and made the recovery process faster.
Recovery Services
Recovery services specialize in assisting individuals to reclaim lost crypto assets. They employ various methods based on the type of crypto asset lost and how it was misplaced.
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JURAT
Jurat takes a unique approach to crypto recovery by embedding legal rights into the blockchain through a Bitcoin hard fork. The Jurat blockchain interfaces with U.S. courts, allowing it to understand and execute court rulings on the blockchain, a process known as on-chain enforcement. This method has already been employed successfully by U.S. courts to prevent hackers from storing stolen crypto.
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M2 Recovery
M2 Recovery offers a comprehensive toolkit, including blockchain analysis, password retrieval, and assistance with cryptocurrency exchanges.
What sets M2 Recovery apart is its offering of custom insurance for crypto asset recovery. This insurance serves as a protective measure for crypto assets, similar to traditional asset insurance, but with requirements to prove ownership. While it comes at a cost, it offers peace of mind against potential risks, such as hacks or errors.
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CNC Cryptocurrency Recovery
The CNC Cryptocurrency Recovery platform offers the services of a team of blockchain experts that uses advanced software and deep knowledge to track and recover assets that have moved through various blockchain networks and wallets.
Although their services may be expensive, they have a strong track record of recovering cryptocurrencies. They also provide on-chain recovery assistance, including legal support if necessary.
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Coinbase Recovery Tool for ERC-20 Tokens
Coinbase provides a recovery tool to assist users in reclaiming unsupported ERC-20 tokens mistakenly sent to their Coinbase wallet. This tool can help retrieve up to 4,000 unsupported ERC-20 tokens. To initiate the recovery, users must provide the Ethereum transaction ID (TXID) and the Coinbase address where the asset was lost.
While the tool currently supports specific ERC-20 tokens, such as Wrapped Ethereum (wETH), TrueUSD (TUSD), and staked Ethereum (stETH), more assets will be added in the future. There is a 5% fee in addition to network fees for recoveries exceeding $100.
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Tezoro
Tezoro is a decentralized crypto backup service designed to provide easy access to your crypto assets in case you lose your passphrase, a situation that could lead to the irreversible loss of your valuable digital assets. Additionally, Tezoro offers a safe way to transfer ownership of your crypto holdings to your loved ones, ensuring they can inherit and manage your assets in the event of your passing or any other situation that prevents access to your wallet.
Tezoro addresses the issues that currently exist with crypto backup services, which often revolves around centralization, which contradicts the ethos of decentralization that otherwise underpins the cryptocurrency space.
Crypto Asset Recovery Best Practices
In the fast-paced crypto space, the loss or theft of digital assets can be a distressing reality. As the crypto landscape evolves, so do the methods for recovering these assets. This section outlines essential best practices to aid in the retrieval of lost or stolen crypto assets, from the importance of swift action to the collaborative efforts of the crypto community.
Act Swiftly
Recovering stolen crypto assets demands swift action. Time is of the essence in the retrieval process. Delaying retrieval efforts makes it progressively challenging to trace and reclaim your assets.
The Mt. Gox case of 2014 serves as a poignant example. Mt. Gox, the largest Bitcoin exchange at the time, went bankrupt after hackers absconded with approximately 850,000 bitcoins. The delay on the affected parties’ part, in addition to the case’s complexity, has made it exceedingly difficult to return the lost funds to the victims.
Engage Law Enforcement
Collaborating with law enforcement agencies is a pivotal aspect of recovering crypto assets. Despite the decentralized nature of cryptocurrencies, many countries have recognized their susceptibility to illicit activities and have initiated actions against crypto-related crimes.
For instance, the United States has established specialized cybercrime units within federal law enforcement to combat cryptocurrency-related offences. A notable case is that of Alexander Vinnik, a Russian citizen arrested in Greece in 2017 for running a cryptocurrency exchange linked to money laundering. He was subsequently extradited to France, where he faced charges related to cybercrime and money laundering.
Seek Legal Expertise
Enlisting the services of legal experts with a specialization in crypto asset recovery is invaluable. These professionals have a profound understanding of blockchain technology and can navigate the intricate legal aspects of regaining lost or stolen assets.
The QuadrigaCX crypto exchange case is a fine illustration of this. When the exchange’s founder, Gerald Cotten, passed away, the platform was unable to access approximately $190 million in customer funds due to his sole possession of the exchange wallet’s private keys. Legal experts played an indispensable role in representing affected customers and working toward the recovery of their assets.
Consult Cybersecurity Professionals
Understanding the root cause of a breach is essential in the recovery of crypto assets. In the 2020 KuCoin hack, where roughly $280 million in cryptocurrencies were pilfered, KuCoin collaborated with cybersecurity firms to investigate the breach and fortify their security measures.
This scenario underscores the critical importance of cybersecurity experts. They not only uncover the intricacies of a breach but also fortify defences to deter future attacks, a fundamental aspect of successful asset recovery.
Leverage Community Support
The crypto community wields considerable influence in asset recovery efforts. The 2020 dForce incident, involving a loss of approximately $25 million in a hack, exemplifies the potent collaborative efforts of the crypto community.
This incident underscores the crypto community’s ability to unite for a common cause, transcending financial considerations and highlighting the decentralized nature of blockchain technology.
Community involvement safeguards the integrity of the crypto space, fostering trust and resilience during challenging times. This shared responsibility demonstrates the profound impact of cryptocurrencies beyond financial transactions, contributing to the creation of a more secure and equitable digital future.
In Conclusion,
The increasing use of cryptocurrencies has also been accompanied by increased incidents of theft, fraud, hacks, and many other criminal activities that increase the risk of individuals and organizations losing their prized digital assets.
According to Defillma, about $7.21 billion worth of digital assets have been stolen in the last via hacks within the last six years. Interestingly, crypto exchanges and wallets are often targets/sources of these losses.
While the anonymity of crypto transactions can complicate recovery efforts, employing the strategies outlined here can enhance your chances of success. Act swiftly, engage law enforcement and experts as needed, and leverage blockchain analysis.
However, the most effective defence is still prevention. To safeguard your crypto assets, implement robust security measures such as utilizing hardware wallets, enabling two-factor authentication, and remaining vigilant against phishing attempts.
By staying well-informed and proactively securing your assets, you can reduce the risk of falling victim to crypto-related crimes in the first place.
Disclaimer: This article is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence.
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