Crypto Losses Can Be Extremely Challenging, But Not Impossible To Recover

Every month, more customers suffer large financial losses as a result of online bitcoin frauds. In the past year, victims in the US have already lost more than $4 billion as a result of sophisticated criminal networks and hackers.

‍

False trading platforms that appear legitimate but are engineered to show fake trading gains and fraudulently channel customer cash are hosted by sophisticated, typically foreign-based networks.

‍

The platforms are so convincingly authentic that the average user cannot tell the difference between a real cryptocurrency website and a fraudulent one.

‍

It is widely considered that once a victim transfers their cryptocurrency from their wallet, which is typically kept on a centralized exchange, to a decentralized exchange or private wallet, the coins are permanently gone.

‍

Pathway for Law Enforcement

Referral to law enforcement is frequently seen to be the sole route with any hope of recouping lost money and locating criminals. Private networks and decentralized wallets, however, are typically beyond the purview of American law enforcement.

‍

The Federal Bureau of Investigation's online iC3 loss form victim's referral to law enforcement option is also rapidly disappearing. Local law enforcement frequently lacks the knowledge, tools, and capacity necessary to look into international crimes or reclaim cryptocurrency from private offshore wallets.

‍

Investigations are still best conducted through the joint efforts of the Department of Justice and FBI crypto task forces. Yet getting the proper authorities to accept and then look into a crypto issue is difficult.

‍

The number of referrals has dramatically increased in tandem with the significant increase in frauds. As a result, there is a backlog of complaints that federal authorities are unlikely to be able to resolve.

‍

Investigation and prosecution threshold loss amounts have risen. Losses under $1 million might not be given attention. Federal officials are more likely to accept a case when it is looked into by a qualified individual who they are familiar with and who has done a significant amount of the homework in support of the referral.

‍

Finding Money

Victims are placed in extremely difficult situations as a result. It may be possible to look into and pursue certain situations privately. Teams with the correct combination of forensic investigative and tracing capabilities, along with an asset recovery lawyer knowledgeable in cryptocurrency investigations and the law, can occasionally assist in finding missing currencies and identifying dishonest actors.

‍

While it can be difficult to recover stolen cryptocurrency from a scammer's secret wallet, blockchain offers a wealth of information and proof that can be used to support recovery efforts.

‍

Every blockchain transactions is publicly recorded and accessible to people who know how to search for it, unlike conventional money transfers with banking institutions. Every transfer can be tracked, and the blockchain records all relevant details regarding each transfer.

‍

The wallet address to which the stolen cryptocurrency was transmitted is among the data that was captured. A skilled specialist can identify the recipient's address through the tracing procedure, which could expose the stolen money hiding in the criminal's wallet.

‍

There is further helpful information regarding the flow of the money and the activities of the recipient wallets.

‍

The recovery of the tokens is a difficult lift.

‍

It is impossible to seize tokens or currencies stored in private wallet networks. However, the environment can offer some opportunities. For the time being, a criminal must use an account at a reputable, centralized cryptocurrency exchange in order to convert cryptocurrency into fiat money.

‍

Account holders are required to provide documentation that demonstrates their identity and complies with KYC requirements, often a current driver's license or passport.

‍

Credible exchanges are raising the bar on their criteria. In some instances, thieves have moved stolen funds to an exchange account and then left the coins there for a long time.

‍

Where Courts Can Be Useful

This data may be retrieved by a civil court order delivered to an exchange within the jurisdiction. There might be more civil court procedures available to freeze and eventually retrieve the coins.

‍

In some cases, exchanges outside the jurisdiction have complied with subpoenas. A lawfully issued civil subpoena or court order must be complied with by US-based organizations. Yet, organizations that host private wallets frequently refuse to comply with a civil or criminal request.

‍

The prospect of recovering stolen monies that have been carelessly held on an exchange exists with the right monitoring, tracing, investigations, and use of subpoenas.

‍

The problem is that by the time a case is reported to a business, con artists have frequently transferred the coins multiple times, most frequently into pooling accounts, which is analogous to the 1980s cocaine narcotics money laundering gangs.

‍

The coins could be cleaned and disguised by doing this. The distinction is that it is possible to see the transfers and where the coins have gone without the need for subpoena power.

‍

Recovery is still difficult and difficult in many circumstances. The benefits of platforms for digital currency are equally its drawbacks. Financial institutions and middlemen are eliminated by peer-to-peer transactions and nearly instantaneous transfers across the ecosystem and the world.

‍

There is no bank engaged in this situation, and there is no FDIC or other government insurance covering lost money. Wallets and exchanges for cryptocurrencies do not offer insurance. Also, recovering stolen money from a bad guy's own wallet is incredibly difficult.

‍

Early intervention is crucial, as is some luck that thieves accidentally left stolen tokens on an exchange or moved the coins there to be exchanged for fiat money.

‍

All hope may not be lost, given that we can now monitor the movement of funds in wallets via blockchain. In the crypto environment, the proverb "You may run, but you cannot hide" might still apply.