Crypto theft is on the rise. Here's how the crimes are committed, and how you can protect yourself (2024)

FAQs

How do people steal your crypto? ›

Some people store private keys in digital repositories like cloud drives and exchanges. Unfortunately, this increases their hacking and theft vulnerability. Once thieves have acquired the private keys, they can use them to access and even transfer Bitcoin holdings.

Create strong passwords for your crypto exchange and wallet accounts. Consider using two-factor authentication (2FA) for even more security. Always keep your password and private crypto keys secure. Keep your finances private — do not brag about your crypto or investments.

They are also widely used as a means of payment for illegal goods and services offered online and offline. Money laundering is the main criminal activity associated with the illicit use of cryptocurrencies.

Cryptojacking is a form of cybercrime specific to cryptocurrencies that has been used on websites to hijack a victim's resources and use them for hashing and mining cryptocurrencies.

The anonymity of cryptocurrency accounts has previously made them attractive to criminals on the dark web, the portion of the internet only accessible through special software and popular among cybercriminals.

There are two main ways criminals obtain cryptocurrency: stealing it directly, or using a scheme to trick people into handing it over.

Shobhit Seth is a freelance writer and an expert on commodities, stocks, alternative investments, cryptocurrency, as well as market and company news.

There are several ways that thieves and scammers can get your cryptocurrency or trick you into giving it to them. Crypto scams often aim to gain private information such as security codes or trick an unsuspecting person into sending cryptocurrency to a compromised digital wallet.

Enable two-factor authentication

Most crypto wallets feature two-factor authentication, a process used to verify user identities during the login process.

Investigators can trace transactions to cryptocurrency exchange locations or other “choke points” that require the user to sign up using their true identification. From this point, the law enforcement officer can get a warrant to force the exchange to divulge the real identity of the account owner.

How much crypto is used for crime? ›

As of early 2022, illicit addresses hold at least $10 billion worth of cryptocurrency, with the vast majority of this held by wallets associated with cryptocurrency theft. Addresses associated with darknet markets and with scams also contribute significantly to this figure.

Sam Bankman-Fried, the founder of failed crypto exchange FTX, was arrested in the Bahamas on Monday after US prosecutors filed criminal charges against him, according to a statement from the government of the Bahamas.

Crypto is a high-risk investment. The value of crypto is very volatile, often fluctuating by huge amounts within a short period. More than with any other investment, you must be prepared to lose what you invest.

Experienced blockchain searchers will investigate the theft and see if they can recover the funds for a price. Sites like Bitcoin Bounty Hunter are a good place to start. However, these services can often be expensive and often don't provide any more information than what is already publicly available.

A cryptocurrency's value can change constantly and dramatically. An investment that may be worth thousands of dollars today could be worth only hundreds tomorrow. If the value goes down, there's no guarantee that it will rise again. Nothing about cryptocurrencies makes them a foolproof investment.

In the end, some governments do not want to lose control over currencies because they cannot track down illegal activities that individuals will carry out with the cryptocurrency. Therefore, some economies fear this virtual currency.

-It's not safe, and it's a bad currency. There are millions of people in the US who would call Bitcoin not safe for investment. They fear that their investment might go wrong. Bitcoin is the oldest and the largest Cryptocurrency in market capitalization, yet people fear investing in Bitcoin.

The benefits of investing in digital currency are great, from swift transactions and increased privacy to year-round investment opportunities and protection from inflation. As such, the global cryptocurrency market has become the fastest-growing market seen in our lifetime.

Those top players represent a mere 0.01% of all bitcoin holders and yet they control 27% of the digital currency, the Wall Street Journal reported. That compares to the old-fashion dollar, where the top 1% controlled 30% of total U.S. household wealth, according to Federal Reserve data.

A major way criminals in the crypto world launder money is by sending digital assets across blockchains, bypassing a centralized service that can trace and freeze transactions. They use so-called cross-chain bridges to make it happen, and the dollar amounts are getting large.

How are people becoming millionaires with crypto? ›

Many people have become crypto millionaires because they've, well, bought low and sold high. But there are also various kinds of crypto millionaires, the crypto entrepreneurs who have the necessary business acumen to create world-changing solutions.

After meeting probable-cause and burden-of-proof requirements, law enforcement can get seizure warrants for any illicit funds that eventually land on compliant exchanges—and many funds eventually do.

With an active Coinbase One subscription, you may be eligible to receive a one-time reimbursem*nt for up to $1,000,000 (U.S. Dollars) of actual losses (or the U.S. Dollar equivalent thereof, in the case such losses were in the form of Digital Currency) that you sustain due to a compromise of your Coinbase Account login ...

In the United States, the precise legal status of cryptocurrency is not settled, but since 2014, the IRS has considered cryptocurrency to be "property" for purposes of federal taxes. This suggests that, like other property, it can be seized by a judgment creditor.

Here's the good news: Only in the last few years, crypto scammers have faced 18 months in prison, 15 years, 115 years — and even 40,000 years. Yes, really, 40,000.

Cybercriminals may create fake websites and apps, complete with names that are nearly identical to well-known and trusted cryptocurrency services. If you mistake these websites for the real thing and enter your personal or account information, the scammers may be able to steal your identity or cryptocurrency.

Instead of being physical money carried around and exchanged in the real world, cryptocurrency payments exist purely as digital entries to an online database describing specific transactions. When you transfer cryptocurrency funds, the transactions are recorded in a public ledger.

Security of Cryptocurrency Accounts

Because cryptocurrency is not strictly controlled, there is no way to recover it if a private key is stolen. Crypto investing is riskier than regular investments since investors are the only ones responsible for keeping their private keys safe and out of the reach of hackers.

There are three primary areas or classifications of security controls. These include management security, operational security, and physical security controls.

Does insurance cover stolen crypto? ›

Representatives from both the SIPC and the FDIC confirmed that neither currently insures crypto assets. That means there's no federal protection for your cryptocurrency.

While individuals have come to trust several crypto wallets and exchanges in order to carry out transactions securely, if your crypto assets are lost, hacked or stolen, there is usually no way to recover your funds.

Satoshi Nakamoto is a pseudonym for the person or people who helped develop the first bitcoin software and introduced the concept of cryptocurrency to the world in a 2008 paper. Nakamoto remained active in the creation of bitcoin and the blockchain until about 2010 but has not been heard from since.

Officials said Colonial Pipeline having immediately alerted the bureau to its May 9 payment to DarkSide - and the precise bitcoin address to which it transferred cryptocurrency - helped the FBI recover some of the proceeds.

The cryptocurrency market isn't sustainable—it's driving climate change with its reliance on dirty energy. Ever since the creation of Bitcoin in 2009, the cryptocurrency market has staked its claim as the 21st century gold rush.

Sam Bankman-Fried became an official billionaire in 2021, thanks to his secondary and more high-profile business, FTX. The crypto exchange grew to be the second largest in the world and a titan of the industry, seeing $10-$15bn traded a day.

Charlie Shrem was sentenced to two years in prison and three years of supervised release for his involvement with the black-market trading of Bitcoin. He served one year of his sentence before being released in 2016.

Criminal Liability With Bitcoin

In one case, an entrepreneur who ran a service facilitating Bitcoin transactions pled guilty and served time in federal prison for facilitating the purchase of illegal drugs on Silk Road using Bitcoin.

Your crypto addresses are safe to display anywhere you would like to accept tips, payments, or donations. It is not possible to steal digital currency with a public address alone.

Can someone hack your crypto? ›

Hackers have already stolen nearly $2 billion worth of cryptocurrency in 2022 — and the year is only half over. As of July, $1.9 billion in crypto has been stolen by cybercriminal hacks, according to Chainalysis' “Mid-year Crypto Crime Update.”

Unfortunately, if you no longer retain ownership of the crypto, there is no clear method for claiming theft losses. In 2018 the IRS clarified that the only losses allowed to be written off with Form 4686 (Casualties and Thefts) were those assets lost as a result of a federally declared disaster.

Report The Scam To The Law Enforcement Authorities

Typically, when you report a scam, the government will track down the criminals and get your funds back for you. Hence, don't hesitate to work with your government.

Does the government know who owns Bitcoin? At the basis of cryptocurrencies like Bitcoin (BTC) stands blockchain technology. A fundamental characteristic of blockchain technology is transparency, meaning that anyone, including the government, can observe all cryptocurrency transactions conducted via that blockchain.

Yes, the government (and anyone else) can track Bitcoin and Bitcoin transactions. All transactions are stored permanently on a public ledger, available to anyone. All the government needs to do is link you to your wallet or transaction.

Collection – Law enforcement must have its own bitcoin wallet to store seized bitcoins. If the bitcoin wallet is not encrypted, law enforcement has complete access (provided proper warrants have been obtained for the seizure of the device).

As a digital currency, there is no way to track or identify who is sending or receiving Bitcoin. This is a perfect way for a scammer to receive a lot of money with no way of tracing it back to them.

The bitcoin blockchain will stop synchronizing in the event of an internet shutdown. The ledgers will immediately stop recording bitcoin transactions, leading to a temporary break in transaction processing. The network will resume if the transactions are consistent.

Hire a bounty hunter - If you are willing to pay a decent amount for the return of your funds there are websites where you can post a bounty. Experienced blockchain searchers will investigate the theft and see if they can recover the funds for a price. Sites like Bitcoin Bounty Hunter are a good place to start.

Who investigates crypto theft? ›

CipherBlade specializes in blockchain forensics and tracking Bitcoin, Ethereum and other cryptocurrencies in investigations.

The advice and offers to help you invest in cryptocurrency are nothing but scams. If you send them crypto, or money of any kind, it'll be gone, and you typically won't get it back.

The Financial Conduct Authority has rules on how this must be handled by the bank. You should get your money back if the payment was within the last 13 months, the bank can't prove that you authorised the payment and that the bank does not believe that you acted with gross negligence.