So now it has happened after all.
Be it despite measures taken like the ones mentioned in the first article of this series, or because people have simply not paid attention to it so far: Malicious third parties have gained access to your own assets. You have become a victim of a fraudulent exchange or hackers have gained access to your wallet – in any case, the GAU has happened.
Is everything over now? Cheer up: without getting your hopes up too much in such cases, there are still a few things that alienated investors can do. Some of the things investors can even take into their own hands without calling in external service providers like Chainalysis. The first thing to do is to clarify a few questions. A basic one is: Where did I lose money?
The steps can be briefly summarized as follows:
We will now take a closer look at these individual points.
Before taking further steps, one should work through the following list of questions:
What exactly happened? Does a service provider such as an exchange deny access to the entire assets or only to certain cryptocurrencies? Has money gone out of one’s wallet? Was the address entered not the desired receiving address?
How long has this been the case? Was there a specific action beforehand that might have triggered the loss of one’s assets or ensured that access to the same is now blocked?
Who has access to my assets? From which computers or other electronic devices do I grant this access?
Important details can be, for example, whether one gave access to any acquaintances or tried to access the service from different devices. This may have been interpreted as a hack attempt, which could lead to a temporary suspension of the account. A conversation with the exchanges should resolve the issue.
Help from the community
What is the crypto community’s sentiment towards this service provider? Do accusations already exist that this one is defrauding its users? This is less about sweeping accusations, but rather about whether other users have really experienced the same thing.
The reverse is also true: Share your experience! You should network with people who have also been affected. The BTC-ECHO Discord, for example, would be an opportunity to describe one’s experiences and exchange ideas with others. It is even better to become proactive and inform yourself before something happens.
If larger amounts of money are involved or many in the community are affected, it can be helpful to examine the blockchain of the respective cryptocurrency more closely. One proceeds similarly here as if one’s own wallet or a transparently viewable smart contract were corrupted: On-chain analysis is a good option for investors.
Even though many points speak against keeping one’s own funds on an exchange, in a smart contract controlled by a third party or a provider like Coinbase, many still do it. It is not simply convenience: traders in particular need to do this.
The problem is that, should this happen, tracking the action from the outside is difficult. But some steps investors can still take.
Sometimes it is not immediately a fraud. Exchanges also do not have to be victims of a hack every time an anomaly occurs, so it may be a simple small bug that causes misunderstanding. Accordingly, it is a good idea to contact the exchange or the team behind the service provider used in general.
On-chain analysis as a tool
The blockchains of Bitcoin and many other cryptocurrencies are, contrary to their reputation, quite transparent. True, exceptions exist such as Monero, MimbleWimble or ZCash, which are anonymous. However, the bulk of blockchains are pseudonymous. Although the identities behind the addresses are unknown, the money transactions are visible to everyone.
This can help those affected. Especially if they know the wallet addresses. With these, they can try to find any transaction paths. Block explorers like walletexplorer.com or oxt.me help with this.
As described earlier, a myriad of possible addresses exist. Hierarchical deterministic wallets also generate additional pairs of public and private keys, so this form of analysis can seem like the proverbial search for a needle in a haystack. Add to that the fact that people more often want to observe transactions across different blockchains. So it’s not just one haystack, but again, it’s multiple haystacks – each with its own huge set of addresses.