Best Practices in Attempting to Recover Funds from Crypto Scams
Scams involving Bitcoin or other cryptocurrencies are rapidly increasing in frequency.
If you have been scammed, you may feel angry, embarrassed and unsure of where to turn to recover your funds. This article lays out the best practices for attempting to recover your funds.
Please note: CryptoAssetRecovery.com offers a service to help you trace crypto assets implicated in scams. However, while we can provide a clear trail and uncover real-world identities linked to suspicious transactions (in some cases), we want to emphasize that the likelihood of actual recovery is low. Nonetheless, the information gained can be valuable for legal proceedings and can contribute to broader efforts against cybercrime.
How likely is it that you can recover your funds?
First, the bad news: it is very unlikely that you will recover your funds.
However, that doesn't mean that you can't recover (emotionally) from the situation that you're currently in. You also have the power to help the government bring the scammers to justice, and to help other people avoid the same fate.
And, in some very specific situations, it appears that the government has returned some portion of recovered funds to their victims.
These suggestions represent best practices:
Don't make the situation worse
Protect your credit
Document the situation while it's all still fresh in your mind
Help the authorities cause pain to the scammers
Help others avoid making the mistakes that you made
How could this situation get worse?
Some scammers focus on defrauding people that have already been scammed. The US Commodity Futures Trading Commission (CFTC) calls these recovery scams:
Commonly, a victim receives a phone call or email from a person claiming to be a government official, an attorney, or recovery service representative. In most cases the fraudsters claim to have the money already in hand, or are working with the court to distribute the funds. In other cases, the victims are told that the fraudsters who took their money have been tracked down and the caller is notifying victims to begin a civil court action.
After making contact with a victim, recovery scammers will explain that they need you to pay an overdue tax, a retainer or some other up-front fee before your funds can be released to you. This is the scam. They have not recovered your funds -- if they had, they could simply take the fee from the funds.
Don't pay anything up-front to someone that claims that they can recover your funds. Get your funds back first, and then deal with any fees.
In many cases, you may have shared private financial information with scammers. We have heard stories of scammers requiring their victims to provide photos of identity documents, like drivers licenses or passports. These documents may make it easier for scammers to steal your identity.
Monitor your Credit, and Consider Placing a Fraud Alert
It is important that you monitor your credit. USA.gov has information on how to check your credit report.
In addition, you may want to place a fraud alert on your credit report. The Federal Trade Commission (FTC) explains: "A fraud alert will make it harder for someone to open a new credit account in your name. A business must verify your identity before it issues new credit in your name."
Filing a fraud alert is simple -- you contact one of the three credit bureaus (Equifax, Experian, or TransUnion), and they will contact the other two.
Document the Situation
Write out the details of how the scam worked, now, while it's easy to find emails, texts and other digital trails.
Here's the information that you should collect and write down so that you can fully report the scam:
Your contact information
Contact information for the individuals and/or company that ran the scam. This could include full name, mail and email addresses, social media profiles, ip addresses (if you have them), and telephone numbers.
A detailed description of the scam itself:
When did the events happen?
Who was involved?
How was the scam started, and how did it proceed?
How much money / crypto did you lose?
What exchanges or wallets did you send funds from and to?
Keep all copies of emails or physical documents
Here is an example of a Victim Impact Statement for a specific scam prosecuted by the US Department of Justice. This will give you a sense of the kind of information that law enforcement may request from victims.
Working with a Professional Tracing Service
Crypto Asset Recovery is here to assist you in tracing your lost assets. Using advanced blockchain forensics, we can track suspicious transactions and link pseudonymous blockchain activities to real-world entities. This can help you gain insight into the scam and provide valuable information for legal proceedings.
While we offer a robust tracing service, we reiterate that the chances of actual recovery are very slim. It is important to have realistic expectations while dealing with the aftermath of crypto scams. Our primary goal is to provide transparency and clarity in a situation that may otherwise seem hopeless.
Report the scam to any Exchanges or Wallet Providers Involved
If you used an exchange, like Coinbase.com, to fund an account and then send those funds to a scammer, you should notify the exchange. The most sophisticated of these exchanges may look for patterns and be able to prevent other people from falling for the same scams.
Should you work with a for-profit agency that specializes in recovering funds for Scam Victims?
Here are a few scam recovery companies that we believe to be legitimate:
CypherTrace.com: CypherTrace claims to have received its initial funding from the US Department of Homeland Security, and was acquired by Mastercard in 2021.
CipherTrace runs a service called the "Defenders League", which trains university students to track stolen and scammed cryptocurrencies pro-bono -- so you may be able to get help tracking your funds, for free.
Note: this likely only involves tracking funds as far as they can be tracked. We still strongly believe that there is no private recovery company that can actually recover your funds. As of April 21st, the Defenders League is not accepting new cases and says that existing cases involve an 8-10 month wait time.
Note: Crypto Asset Recovery has a business relationship with CNC Intel. If you choose to work with them using the link below, Crypto Asset Recovery will be paid a fee.
CNCIntel.com: CNC Intelligence was referred to us by a contact at Chainalysis.com, and we've spoken with Matt Stern, their CEO and Chief of Cyber Investigations. I believe them to be legitimate and I believe that through working with law enforcement and legal teams overseas they have been able to recover funds lost through scams and thefts in at least a few cases.
AssetReality.com: Asset Reality has a partnership with Metamask and their parent company Consensys.net: You can find the press release announcing the partnership here.
However, please do your own research.
You also need to weigh any up-front costs against the amount of money that you've lost. For example, if you lost $10,000, and it costs an additional 10% up-front to work with a recovery company, should you pay that fee? What are the odds that the company will be able to recover at least $1,000 for you? In many cases, those odds are small.
Here are a few reasons to exercise caution when working with any company that says that they can recover funds that you have lost to scams or theft:
Many of the scam recovery websites that we looked at in 2021 and 2022 (excluding those listed above) appeared to be running scams themselves, often guaranteeing that they can recover funds.
I'm not going to mention any of these companies by name, but, if you search the company's site for "Bitcoin", several of them mention that it's very difficult to recover cryptocurrencies. One basically recommends that you ask the scammer to return your funds. In my opinion, this is third-party confirmation that working with these agencies is unlikely to be successful.
A careful scammer won't leave any opportunity for a 3rd party to retrieve funds. Nothing about that changes by hiring an agency to look into the situation.
Even legitimate recovery companies probably have the most success recovering funds when the scam victim paid for the scam with fiat money (not cryptocurrencies) using a credit card. (This is a different scenario than if you paid for crypto with a credit card and then sent the crypto to a scammer).
The best-case scenario is that the for-profit agency tracks your funds to an exchange and then requests law enforcement involved. These are steps that you could do yourself.
Has the US Federal Government Ever Recovered Funds and Redistributed them to Victims?
The basic idea is: if you report a scam, the government tracks the criminals (perhaps when they withdraw their funds from an exchange) and recovers funds from them -- might the government send your funds back to you?
The US government says that for certain types of scams, they do occasionally return funds. For example, the US Securities and Exchange Commission (SEC) says that "Sometimes a successful SEC enforcement action results in recovered funds being distributed to victims."
The article goes on to say: "Not all victims are able to recover money. Victims who do recover money may receive substantially less than their losses and the process for distributing the money may take a long time."
The CFTC recently announced a restitution order against David Gilbert Saffron and Circle Society, Corp for defrauding 179 individuals of USD $15.8 million worth of Bitcoin and U.S. dollar in a foreign exchange and cryptocurrency trading scheme. However, they warn that "restitution orders may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets".
In July, 2021, the US Department of Justice announced that Roger Nils-Jonas Karlsson defrauded more than 3,500 people of about $16 million between 2012 and 2019. He was sentenced to 15 years in prison, and apparently some funds were recovered which are being returned to victims.
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