Crypto payments are usually permanent, and the non-centralized nature of blockchain infrastructure can complicate the recovery of lost funds. Prevention is critical to defense: 2-factor verification, utilizing hardware wallets, and being wary of phishing attempts.
The likelihood of recovering funds lost on an exchange depends on the specific circumstances and policies of the respective exchange. It is advisable to be aware of the terms and conditions, security practices and user protection to minimize the risk of loss and understand the available options for recovering funds in the event of an incident.
Identifying hacking
First of all, make sure that a breach has indeed happened. Check for some indications that could point out that your account has been compromised, among them:
- Abnormal behavior on the account
- Problems with logging into your account
- Suspicious emails
- Problems with the website
If you think a stock exchange was hacked, you should take a few actions right away:
- Discontinue any and all activities
- Change your password
- If you haven’t already done so, turn on 2-factor verification
- Contact the exchange
- Check your security settings
- Check your devices for malware
It’s especially valuable to keep in mind that ensuring the security of your account is an always-on effort.Be sure to check your security settings regularly and upgrade your passcode and 2-factor verification preferences as necessary.
What does the refund process look like?
Among the initial things you need to do if you think your crypto stock exchange may have been compromised is to get in touch with the platform itself. Most services have a support team that can help you with safety problems or hacking suspicions.
An external recovery scenario is also possible.It may involve contacting law enforcement — the local police or cybercrime unit. In addition, there are specialized firms that offer services to restore stolen and misplaced digital currency, but they charge a fee for their services and do not guarantee success.
In August 2023, the U.S. FBI announced an increase in the number of companies falsely promising refunds for funds lost to cryptosphere scams. Based on data from the FBI’s Center for Internet Crime Complaints (IC3), victims indicated that in 2022, they had lost more than $2.5 bln in crypto investment scams only.
The FBI report says that representatives of fraudulent businesses that specialize in «returning» lost deposits reach out to victims either by contacting them directly on social networks or through comments to posts on crypto sites.
Criminals either charge an upfront fee and stop communicating, or produce an incomplete or inaccurate tracking report and demand additional payments to recover the funds. To gain trust, scammers may allege a connection to legislation or law offices.
The FBI reminds that companies involved in returning stored stolen crypto assets, even if they are honest professionals, cannot issue cryptocurrency attachment notices. Crypto stock markets have only been freezing accounts through in-house procedures or in retaliation for a lawsuit. Victims can also file a civil lawsuit in court.
FBI staff offer a set of helpful tips to protect users from scammers in this category:
- Carefully examine ads for digital currency reclaim services.Be wary if the firm utilizes nebulous terms, has a minor online footprint, and guarantees a refund.
- If an unknown person contacts you and claims they can return stolen cryptocurrency, do not disclose any financial or private info and don’t submit the cash.
- Legal enforcement agencies don’t fee victims to solve criminal cases. When anyone makes a claim to be connected to the FBI, please check with your local FBI station for verification.
When informing law enforcement of a crypto investment scam, provide detailed transaction information and details of the persons alleging to provide digital currency return programs.
How do cryptocurrency exchanges compensate customers for losses in case a platform is hacked and funds are lost?
Compensation for losses resulting from platform hacking and loss of funds on a cryptocurrency exchange varies depending on the exchange and its policies. Here are some common ways cryptocurrency exchanges can compensate customers in such situations:
Insurance funds. Some exchanges have insurance policies or reserve funds to cover losses due to hacking or security breaches. These funds are designed to reimburse affected users and compensate them for lost funds. The availability and degree of insurance benefits will vary from exchange to exchange, so it is important to read the exchange’s terms of service or user agreement to understand the extent of coverage provided.
Refund Programs. In certain cases, exchanges may initiate reimbursement programs to compensate users who have suffered losses. These programs may be funded by the exchange itself through insurance arrangements or other means. The exchange may establish specific criteria and procedures to allow users to submit claims and go through a verification process before receiving compensation.
Token exchanges or debt receipts. In some cases, an exchange can give receipts or replace lost tokens with other coins. These receipts or replacement tokens represent the value of the lost funds and can subsequently be redeemed or exchanged for the original cryptocurrency or other form of compensation once the exchange recovers or stabilizes.
Legal settlement. In cases where an exchange is found to be guilty of a security breach, affected users can take legal action to seek compensation. The appeal may involve filing a lawsuit against the exchange, either individually or as part of a class action, to recoup lost assets. The outcome of the lawsuit will be based on a variety of variables, depending on jurisdiction and the strength of the plaintiff’s claims.
Not all cryptocurrency exchanges offer compensation for losses, and the availability of reimbursement programs or insurance cover can differ considerably. Moreover, even if compensation is offered, the process can take time and the amount of compensation may not fully cover the initial loss.
Don’t lose hope
While cryptocurrency theft is always a frightening and unfortunate incident, remember that there are services and experts available to help search for lost funds. Most importantly, don’t lose hope. Thanks to advances in blockchain analysis and cybercrime investigation, the probability of getting back stolen digital currency is steadily increasing.