My cryptocurrency was stolen. What to do?

Hackers regularly attack cryptocurrency projects, and users lose digital assets worth hundreds of thousands and millions of dollars. Even the most experienced participants are not protected from this. For example, last week the CEO of the cryptocurrency investment company DeFiance Catital lost 78 NFTs from five collections, as well as tokens worth $1.7 million, as a result of a hacker attack.

Crypto services are reported to be hacked regularly. None of the largest sites escaped attacks. Therefore, users need to be especially careful about the issue of storing funds in digital assets.

Experts do not recommend keeping large amounts of cryptocurrency on centralized services. One of the safest ways to store it is hardware wallets.

Cryptocurrency assets stored on the exchange are very likely to attract the attention of intruders, agreed the lawyer of the Criminal Defense Firm Daniil Gorkov. He warned that in the event of a hack and theft of cryptocurrency from the account, the probability of a successful and complete return of assets is low.

Now the most common methods of stealing cryptocurrency are phishing and false promises of a quick and guaranteed increase in capital, which, from the point of view of criminal law, are subject to qualification under Article 159 of the Criminal Code of the Russian Federation “Fraud”. According to the expert, criminal proceedings increase the chances, but do not guarantee that the crypto assets will be returned to the rightful owner.

Mikhail Bystrov, partner, head of the FinTech & Crypto practice at the DRC law firm, named the sequence of actions of the user whose cryptocurrency was stolen:

1. Immediate notification of the exchange or crypto wallet operator about what happened.

2. Collection of the maximum possible evidence base. It includes, among other things, screenshots of transactions and uploads of transaction logs related to accounts.

3. Submission of an application to law enforcement agencies in order to investigate a crime.

4. Subject to the initiation of a criminal case - sending a request to the operator of the exchange / wallet for assistance in conducting an investigation, including all transactions related to the movement of stolen funds and the wallets of the recipients of these funds. It should always be remembered that since the operators of the relevant resources hide as much as possible from all possible risks associated, among other things, with the theft of funds, they will absolutely refuse to provide any assistance without a criminal case.

5. If you have the appropriate technical skills, use the available tools for self-tracking transactions. If you are a Russian citizen, you can also apply to Rosfinmonitoring (RFM) for these purposes, since both the RFM and the Ministry of Internal Affairs already use the appropriate transaction tracking tools. However, it is important to remember that almost all such tools are designed to track "classic" cryptocurrencies (ETH, BTC) and their derivatives, and are not designed to track cryptocurrencies that are anonymous by design by default. Additionally, some of the newer generation mixers that have emerged in the last couple of years can also make it very difficult to effectively investigate.

It can be very difficult for victims to carry out these actions on their own, the expert warned. This is due, among other things, to the fact that law enforcement agencies, when directly contacted by victims in such cases, initiate criminal cases much less frequently than when lawyers already interacting with them apply, and also do not always have sufficient technical competencies to conduct a full-fledged investigation in order to clarify where and to whom the stolen cryptocurrency went.

“For this reason, it is advisable to apply to specialized law firms that work with such cases both at the legal and technical levels,” the specialist noted.

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