In our previous article, Recovering Lost or Stolen Crypto (part 1), we looked at the question:
- How secure is your valuable Bitcoin and AltCoins?
Now we will look at the follow-up question:
- What happens if your cryptocurrency is lost or stolen – can it be recovered or is it gone for good?
Below we will attempt to answer this question across the various scenarios covered in part 1.
Chances of recovering crypto
In this section we will look at the various scenarios from which crypto assets may be lost or stolen and assess the chances of their recovery.
As a general rule of thumb the speed of action in responding to a breach is key to limiting the extent of the damage. Unfortunately it is often the case that if crypto has been stolen then in many situations it is already too late. However, there ‘may’ be a possibility of engaging a crypto recovery service to see if they can follow the cryptocurrency address paper trail in order to try get the missing crypto assets back. See the ‘Crypto recovery services’ section towards the end of this article for further details.
This type of wallet is probably the most risky that you can use to hold and trade cryptocurrencies. One problem is that with the likes of MetaMask you are only prompted for the password once during setup. This makes the wallet available for connecting to DEX’s automatically which is very concerning given one click on a fake link in an email or on a website could take you to a fake exchange and potentially allow you to purchase a fictitious token using real crypto!
If a CEX (Central Exchange) wallet becomes compromised then the first thing to do is take action ASAP. For some exchanges it is necessary to contact support (e.g. Coinbase – below left) in order to alert them and have them lock your account. For others you can initiate certain actions yourself (e.g. Binance – below right). In both scenarios speed of taking action is essential in order to try limit any damage with regards a loss of crypto.
With some exchanges a percentage of your crypto may be held in an offline vault which has a delay to withdrawing funds that gives a user more time to act in the event of a compromise and limits the damage to say 5% of assets held.
Mobile or computer app wallet
Exchange wallets were covered in the previous section and hardware wallets are covered in the next one. This leaves independent wallets which rely on the use of passwords and often 2FA (Two-Factor Authentication) for protecting them. Keeping the device protected and in a safe place are also security steps that can be taken as well as ensuring they are used on secure connections (e.g. VPN) and kept free from viruses and malware via Anti-Virus software.
If the wallet is compromised then the chances are that the stolen crypto will be lost forever and that speedy response times are the only real hope for damage limitation.
This is the most secure way of protecting your crypto and requires a hacker to not only guess the password or PIN but they also need physical access to the hardware wallet itself. Additionally the wallet needs connecting to a linked software wallet app in order to perform transfers.
All-in-all the biggest risk of losing crypto from one of these wallets is by having the seed phrase stolen which means the wallet can be restored to a new wallet then the assets can be transferred out to crypto address(es) owned by the perpetrator. At this point the chances of recovering any of the stolen crypto is slim to none.
If a seed phrase to a wallet has been lost then there is no way of recovering this other than enlisting the help of a service that will attempt to brute force guess it. The only other option is to setup a new wallet and hence a new seed phrase. The result of the latter is all of the crypto in the wallet is lost!
If a seed phrase has been stolen then the only option available is to transfer the crypto assets within the wallet to another existing or new wallet. This action needs to be carried out ASAP in order to perform this action before the perpetrator does the same action. If not done in time then the chances are all the crypto in the wallet will be lost!
The types of risks that CEX’s are vulnerable to are hacking attempts that can result in the theft of crypto from software wallets, staking pools, or the minting of new tokens using Smart Contracts. These can impact user accounts by the direct loss of assets held, dilution of tokens held, or substantial loss in coin values due to the loss of confidence with the affected exchange.
As for the chances of getting back the lost crypto heavily depends on the exchange involved and whether or not they use the likes of cold storage vaults or pool splitting to limit the extend of the damage. Alternatively whether or not they have cash assets or insurance to compensate users for account losses as a result of any breach.
When there has been a hack that has resulted in dilution of coins in circulation or loss of confidence then depends on how quickly and in what way the developers/owners of the exchange respond. A swift and effective response may help the price of the native token recover in value. A replacement upgraded version of the token may be air-dropped to coin holders making the original token worthless.
In the event of a major heist then it has been known for the exchange to appeal for the return of the assets stolen in return for no legal action being taken – this has actually happened on more than one occasion!
Fake tokens, fake websites, and crypto scams over time have become more sophisticated and harder to identify. The main problem is retrieval of lost crypto can be extremely difficult as the scammers tend to put as much effort into covering their tracks as they do into the scam itself. This means prevention by learning about possible scams and what to look out for is definitely the best approach in order to avoid becoming a victim.
How to Identify Cryptocurrency and ICO Scams is a good article on this subject.
Transfer crypto to wrong address
If your crypto is sent to an incompatible address (e.g. Bitcoin sent to an Ethereum address) then the best outcome is that the transfer service/exchange manages to spot this (e.g. Ethereum addresses start with ‘0x’) and voids the transfer. The worst outcome is that your crypto is lost for good and rendered unrecoverable.
In the event that you send crypto to an incorrect address then the outcome depends on whether the address is incorrect because it does not exist or it is a correct address but not the intended recipient. If the address does not exist then the transfer should fail and only gas fees would be incurred. If the address is an unintended recipient then it depends on the good will of the recipient returning the funds.
Crypto recovery services
In the event of crypto assets being lost then there are a variety of companies who can provide professional services to assist with certain situations:
Our staff consists of industry experts that understand how to obtain your money back in the quickest amount of time possible. Our goal is to fight for your rights and get your money back from internet trading frauds as quickly as possible. We employ highly targeted and smart approaches that allow us to reclaim control of the situation and expose their faults, making us virtually unbeatable. Our years of experience ensure that you will achieve a 100% success rate.atriumforensics.com
No details on pricing were available on the company website.
For further info: https://atriumforensics.com
Bitcoin Recovery Co.
A cryptocurrency recovery firm that is facilitated by Bukh Law Firm.
We can return your access to your cryptocurrency today. That’s our mission.bitcoinrecovery.co
A free consultation is offered over the phone or in person. This explains the recovery process in detail and possible options available. Fees start at 15% of the recovered amount.
For further info: https://bitcoinrecovery.co
Operated since 2014.
If you’ve lost access to your Bitcoin, Ethereum or any other cryptocurrency wallet, we can help you recover it.
Our wallet recovery service have been operating since 2014 and running specialized hardware and software that can decrypt your wallet and recover your funds.brutebrothers.com
Charges are 15% of the recovered coins and can be paid from the coins recovered.
For further info: https://brutebrothers.com
KeychainX Crypto Wallet Recovery Services
They have existed since 2017.
We recover lost crypto wallets like Dogecoin Ethereum and Bitcoin from wallet.dat multibit classic Langerhans blockchain second or first password and Ethereum pre ico or Android Schildbach. We can also decrypt your blockchain.info 15 17 19 or 21 word mnemonic that is no longer supported by blockchain.com. Our services has been trusted from people all over the world.keychainx.io
Services include Wallet Recovery, Private key recovery, Mnemonic Phrase Brute Force Cracking, and Hardware scan or recovery. No pricing details were available on their website.
For further info: https://keychainx.io
Wallet Recovery Services
WRS have existed since 2013.
We take your wallet file and best guesses of what the password could be and use our custom software to try and find the right password.
We can also help if you are having problems with your seed words (recovery phrase).www.walletrecoveryservices.com
Prices of their services range from 15-20% of the value of the wallet recovered.
For further info: https://www.walletrecoveryservices.com
Below are some useful articles on the above areas:
- Crypto hacks, heists & scams
- Keeping your Digital Currency safe using Crypto Wallets
- Securing web sites against Hackers
If you have previously lost some crypto, or had it stolen, did you manage to recover all or any of it? If so please share your experience below.