What Are My Chances of A Crypto Scam Recovery?
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What Are My Chances of A Crypto Scam Recovery?
12 min read·Apr 6, 2024
Have you become the victim of an online or phone based scam that has resulted in you losing a lot of your net worth through cryptocurrency? Are you desperate to get your crypto back? Are you wondering what you should do and who can genuinely help you? Maybe you have even gone to the police and you have been told “sorry, we can’t help you.” In this article, I highlight many of the barriers to crypto scam recovery. These include the lies fake cryptocurrency recovery scammers tell you, and why the amount of cryptocurrency you have lost matters to your chances of recovery.
Cryptocurrency Scams
The type of cryptocurrency scams I am addressing here are scams that have, through one way or another, convinced you to part with your cryptocurrency. Or, you have unwittingly given access to a scammer who has stolen your crypto. Broadly speaking, this has happened either through:
· You voluntarily transferring your cryptocurrency to a business that you thought was ‘safe’, and it isn’t (such as to an investment which you thought was legitimate), or
· You sent your crypto to someone you trusted, and they weren’t who they say they are, or
· You have handed over your private key or secret recovery phrase to someone under a false pretext, or
· Your private key or secret recovery phrase has been stolen.
There are other ways to have your cryptocurrency stolen, like through malicious smart contracts, hacks and software based attacks. But in this article I have the first four types in mind.
How Crypto Scam Recovery Can Not Happen
Let’s start with dealing with some false assumptions and narratives that are NOT true.
There are always two sides to every coin, so the cliché goes. This is true with cryptocurrency. With crypto, one of the benefits is that you can instantly transfer wealth with a minimum of controls and no middleman anywhere in the world. It’s what’s called a “trustless” system, and it puts a lot of financial transaction power back into your own hands. No authority keeps watch; there’s no one to stop you making mistakes and when a transaction is completed. It exists forever on the ‘black box’ of the blockchain (of whichever cryptocurrency you are using).
With cryptocurrency, once it is done and confirmed, it is permanent.
So let’s address some of the lies that recovery scammers tell you:
CHARGE BACK SCHEMES ARE FAKE.
If anyone tells you they can recover your cryptocurrency through a chargeback like with a credit card, they are lying. Please, run the other way of anyone who tells you this. They are recovery scammers.
You will not get a charge-back on your credit card when you buy crypto with it. This is because the purchase of the cryptocurrency was legitimate, lawful and covered by the cards terms and conditions. What you subsequently did with the cryptocurrency is not the responsibility of the credit card company.
REVERSE HACKING THE SCAMMERS IS ILLEGAL.
Unauthorised access to someone else’s software, hardware, digital wallet etc, is illegal. Yes, even if the money contained within it is yours.
Sometimes recovery scammers suggest using reverse hacking to break into a scammer’s digital assets to gain your crypto scam recovery. Hacking by private individuals, even of criminals, is illegal, and may result in exposing you to becoming a party to a crime. This is a very dangerous path to tread. Don’t do it. If your case does get into the hands of law enforcement (which it can even if you don’t report it, because there will be other victims, and they may report it), then the evidence may surface that you authorised a crime.
So don’t.
NEGOTIATING WITH THE SCAMMERS WILL NOT WORK.
Recovery scammers may also tell you that they will gain a crypto scam recovery by finding and bribing or negotiating with the scammers. Wizard Asset Recovery has been in cyber investigations since 2008, and we have never heard of this happening. Not once.
· Firstly, bribery is illegal, so don’t go there.
· The second problem is identity. Wizard Asset Recovery can sometimes identify the scammers by name, location and photos, but not always. Many times the identity will only become clear after law enforcement has used our reports to issue subpoenas to gain KYC information.
· The third problem is gaining leverage over the scammers. We’ve seen even arrested scammers refusing to reveal private keys or negotiate. Most scammers know they hold the advantage, and the threat of passing on their details to law enforcement is not going to faze experienced scammers.
If a self-proclaimed recovery agent says they can gather enough evidence to negotiate with a scammer, don’t believe them. Unless your scammer is extremely stupid and/or naive, it won’t work.
EXCHANGES CANNOT (NORMALLY) RETURN YOUR CRYPTO.
Recovery scammers may also tell you that they will ask the cryptocurrency exchange you used to get effect a crypto scam recovery and have it returned to you.
In principle this MAY be possible. Wizard Asset Recovery has had some success asking exchanges to freeze wallets, but it can only ever be done for a short time (like a few days) without law enforcement involvement. So in theory, yes, but in practice, not often. It is rare because there are a number of problems that need to be overcome:
· Your crypto may have gone through an exchange, but it is probably no longer there. Once it has left the exchange, the exchange can not freeze the wallet and return the crypto.
· Crypto exchanges will not just hand you crypto, even if we can prove it is yours. It requires a court order to effect a crypto scam recovery from an exchange.
· Some exchanges are morally corrupt (if not legally corrupt to). Unless there is a LEGAL LAW ENFORCEABLE requirement to act against wallets they control, they will be very reticent to do so.
· Jurisdication can be a big impediment. If an exchange is based in a non-western country and you are in a western country, then the exchange may be virtually untouchable. They will not comply with a request from a recovery agent, because they don’t have to.
· Bigger exchanges are process driven, compliance and process driven, and the bigger they are and more ‘western’ they are, the less flexibility they will have to listen to requests for crypto scam recovery action. They will not ‘listen’ to a recovery agent, even when the agent provides the exchange proof that they are harbouring stolen crypto. They will only listen to requests that come through the right channels, which is almost always through legal avenues — such as subpoenas and court orders.
So that is a lot of bad news right?
The bad news makes crypto scam recovery harder for us, but it also helps to keep you safe from recovery scammers if you know this and you can use it to keep you out of their clutches.
98% of the time, the only plausible way to gain a crypto scam recovery is through law enforcement, subpoenas and prosecution.
OW RECOVERY REALLY HAPPENS
CRYPTO SCAM RECOVERY THROUGH LAW ENFORCEMENT
This is not legal advice. This is just Wizard Asset Recovery’s long experience (since 2008) talking.
Allow me to share the basic process of how cryptocurrency scam recovery can happen:
1. Gather the Evidence to Meet The Burden of Proof Test
At Wizard Asset Recovery, we hold licenses and certifications for some of the world’s leading blockchain tracing tools (the same tools the FBI and Secret Service use). We use these tools to undertake a forensic blockchain investigation to ‘follow the money‘ from your wallet to the scammers wallet and across the ecosystem. We also undertake Open Source Intelligence (OSINT) to search for digital breadcrumbs across the normal internet and dark web, to build a picture of who, what, when and where. This all comes together into an evidence package which is prepared for law enforcement.
2. Passing Evidence Package to Law Enforcement
Our evidence package consists of an inhouse developed report that is tailor-made for law enforcement (LEA). Co developed by our highly experienced team, our ex-FBI liasion officer, with constant feedback from lawenforecment. Once we have completed your investigation, LEA receive the report and all the evidence we have gathered, which they then replicate in a fraction of the time it would otherwise take. It saves LEA upwards of 80 hours in investigation time in meeting the burden of proof requirement.
3. Investigation begins
When an investigation begins, the law enforcement officer engages directly with the victim. In time, hopefully a decision is made to send an affidavit for a warrant to get the identity of the scammer from an exchange (under KYC, CTF and AML rules) through which the cryptocurrency has passed through. Identity information is also obtained from social media, email providers, domain hosters and others identified by Wizard Asset Recovery.
4. Prosecution and Execution of Seizure
If the law enforcement execution looks water tight, a prosecutor will (hopefully) agree to pickup the case. All going well, the next stage will begin. This step depends on the case. If the cryptocurrency is still (at least in part) at the exchange, then the prosecutor will push for a court-issued warrant, issued to the exchange for a freeze and seizure of the stolen cryptocurrency. If the scammer can be located, he will be arrested and assets seized.
5. When is my Recovery?
This does NOT mean you will get a quick recovery. At Wizard Asset Recovery, we have at least one case where the crypto wallet was frozen by court-order for over a year, and still no recovery of money to the victim. The crypto is still sitting there, locked up tight, but recovery is still pending. Why? One reason is that the proceeds of crime can be held in evidence for quite some time. The victim who initiated the investigation is unlikely to be the ONLY victim, and so there can be valid claims by many people for the same assets. As you can imagine, this makes disbursement of claims a complex problem that takes time to work through.
Frustratingly, this path is slow, and so if you have lost cryptocurrency to a scammer, do not expect a quick outcome.
The law enforcement path is still the most reliable, but there are still no guarantees.
No Guarantees
Crypto currency scams are increasing at an alarming rate, and at a rate that is not being matched by increased training and funding for law enforcement. This makes crypto scam recovery harder each year:
The FBI IC3 website stats for 2021 were:
– USD$6.9billion in victim losses to 2021
– 2,300 new complaints per day (over 840,000 in 2021)
– 550,000+ new complaints per year (5 year average)
These were all cyber crimes, but not necessarily involving crypto. Let’s do some simple math to see what these statistics mean:
If each complaint takes 100 hrs of investigation, then that is:
· 84 million work hours in one year
· an average working year has 2100 work hours per agent
· to process that many cases in one year would require 40,000 full time cyber agents
· sadly there is currently less than 1500 FBI cyber agents, so each agent is expected to do the work of 26 agents.
· each agent would therefore need to process a case in less than 4 hours to keep up!
Every day each agent gets further and further behind.
With those sort of figures, is it any wonder that there is stiff competition to get your particular case investigated?
So with that volume of complaints, it has become painfully apparant that law enforcement must prioritise the cases they take on.
And it’s why what Wizard Asset Recovery does is so valuable, because we dramatically cut down the 100 hours of work, enabling the same number of agents to take on more cases. Perhaps take yours. A known quantity case that requires, say 25 hours of work compared to an unknown quantity 100 hour case…
PUBLIC PRIVATE PARTNERSHIPS
Amongst all this bad news is some good news.
In recent times, law enforcement has recognized the value of public-private partnerships for crypto scam recovery operations.
WEST AFRICA
In 2023 Wizard Asset Recovery entered into a memorandum of understanding with the Nigerian Economic and Financial Crimes Commission (EFCC). Together, our teams had immediate success identifying the perpetrators of a number of crypto currency scams, making arrests and chasing others who are on the run in West Africa.
Wizard Asset Recovery finds then, EFCC arrests them. (Some of the Wizard Asset Recovery team with the EFCC in Nigeria in 2023)
But it gets better.
US-law enforcement has recognised our assistance in conducting Nigerian scam-busting operations, and at the time of writing, a scammer is waiting extradition to the USA for trial.
USA
At the Blockchain Forum in Serbia in 2023, private-public partnerships was a key topic. Wizard Asset Recovery’s founder, Michael Roberts, had the privilege of discussing this very topic with Special Agents from the FBI and private companies fighting cyber crime alongside Wizard Asset Recovery. Momentum is growing for law enforcement and companies like Wizard Asset Recovery to work more closely together in closing more successful crypto scam recovery operations.
Wizard Asset Recovery finds them, law enforcement bags them, you get relief and justice.
WILL RECOVERY BE LIKELY IN YOUR CASE?
The criteria which law enforcement use to decide which cases to take on and investigate is both a sensitive topic and constantly moving. It also changes between local and federal agencies.
The FBI, for example, with the above highlighted caseload, probably has a different criteria for which cases to take compared to the Secret Service, RCMP or your local Sheriff.
At Wizard Asset Recovery, we have strict criteria to determine which cases we take on and which ones we can not. It has been a sobering experience telling victims who need help, that we will not take their case because they have no chance of a crypto scam recovery.
We are very conscious of victims contacting us full of hope of a recovery, and then finding out, after spending a lot of money, that our law enforcement liaison officer can not find a LEA agency to accept their case. When that happens, the hope of the victim plummets.
It’s one thing to have lost your life savings, but to add salt onto those wounds through disappointment is something we try at all costs to avoid.
REALISTIC EXPECTATIONS
That is why, my friend, you must have realistic expectations about your chances of a crypto scam recovery.
The chances of getting your crypto back — even for a great look case — is hard and long.
But if your particular cases has any of these criteria, then your chances drop much further:
· If you are in the US and your crypto loss is less than USD$300,000 (not including fake ‘investment returns’, which were never real), then crypto recovery will be very difficult, or
· The scammer is traced to a domicile that law enforcement can not reach, or
· The crypto is traced to a location that can’t be reached by law enforcement, or
· You are in a country where your law enforcement does not accept our reports, won’t work with private investigators or are so poorly trained that they can not investigate the crime properly.
If the above criteria applies to your case, then we will advise against undertaking an expensive recovery focused full investigation service with a managed handover of the evidence package to federal law enforcement.
Your only real path is either local law enforcement, who MAY be able to take your case (if you can find one with the skills, motivation and low caseload), or we trace the scammers to a country where we have an MOU with law enforcement.
I JUST WANT ANSWERS
If your case is not accept by us, and you still want to pay for an investigation, then we will provide you with a much cheaper investigation report, called an EVIDENCE PACK and hand it over to you. But it will be at your prerogative, discretion and responsibility to try and find a local law enforcement agency who will take your case and investigate on your behalf.
BUT PLEASE UNDERSTAND THAT LAW ENFORCEMENT OF ANY KIND WILL LIKELY SAY NO IF YOUR CASE IS LOW VALUE OR THE BAD ACTOR AND THE CRYPTO IS IN A COUNTRY THEY CAN’T REACH.
Conclusion about Cryptocurrency Recovery Chances
Cryptocurrency scammers currently have the upper-hand because of the sheer volume of scams and the pressure that applies to police. Unless your case is high value and both you and the bad actor are in locations that law enforcement can act, and/or the cryptocurrency is in an exchange where it can be frozen, then a crypto scam recovery will be nearly impossible to achieve.
If you want to pursue recovery anyway, then we can do the investigation for you, hand you the report, and leave it with you to find a police department to take your case. If you go down this path, and you are successful, then you can be rest assured that we will support you through every step. We will provide assistance to the law enforcement agents when asked, we can ghost write subpoenas, will provide expert witness in court and we also provide pro-bono training to law enforcement agencies.
DO NOT GIVE UP HOPE
One last word of hope: Sometimes there is hope even if law enforcement initially reject your case. This is because other victims may come forward. For example, if we find 5 victims who have each lost $100k each, but together make a total loss of $500k, then that easily exceeds the threshold above which a federal investigator will act. Scammers have hundreds or thousands of victims, when they come to us, then together crypto scam recovery becomes exponentially more likely.
Do not give up hope, there is a chance that even a smaller crypto loss can be recovered.
With a little luck, hard work and a lot of patience, hopefully your case will be one of those that come to a successful conclusion.
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