Can FBI Recover Stolen Crypto? What To Do When They Don’t?

Cryptocurrencies have completely transformed the financial sector by enabling anonymous and secure peer-to-peer transactions.

However, millions of dollars have been lost due to hacking and con artists because this digital currency is not impervious to theft.

Although it may seem hard, recovering stolen cryptocurrency is not impossible. But that’s not the case. In fact, it is possible to recover stolen Bitcoin; there are tried-and-true ways to get back your stolen coins.

Online bitcoin scams target more people every month, causing them to lose a lot of money. US-based victims have already lost more than $4 billion to sophisticated criminal networks and hackers.

Most people agree that once a victim moves their cryptocurrency from their wallet—typically kept on a centralized exchange—to a decentralized exchange or private wallet, the coins are lost forever. 

But there are always ways to recover the stolen cryptocurrency.

As a professional in blockchain who is aware of the value of protecting digital assets, I have looked into the possibility of the FBI recovering stolen bitcoin.

Without a doubt, by filing a report, you create a paper trail that could be used to track down the hacker and recover your crypto.

But is it possible for the FBI to recover digital currency that has been stolen? Are there any recovery success stories?

Read more to find out the answers!

Can the FBI trace stolen bitcoin?

Bitcoin (BTC) and other cryptocurrencies are built on blockchain technology. Blockchain technology’s transparency makes all transactions made using bitcoin visible to everyone, including the government.

Because of the transparency of blockchain technology, Bitcoin transactions are visible to everyone. Additionally, the Bitcoin blockchain permanently stores the history of every transaction, proving that it is easy to follow BTC transactions. As a result, the FBI may keep an eye on what happens on the Bitcoin blockchain through law enforcement.

Whether or not BTC transactions can be tracked depends on the ability of a user to connect their transaction activity on the Bitcoin blockchain to their identity.

Cryptocurrency transactions made to any Bitcoin wallet address are open to all. Authorities can check the Bitcoin addresses used in transactions to find out where the money is coming from and going. In this way, authorities are made aware of what is happening.

Many Bitcoin users eventually reveal their identities (for instance, when interacting with well-known wallets or on centralized exchanges). 

When a Bitcoin transaction can be linked to a person’s identity, the government can track who owns it. As a result, BTC transactions are not always completely anonymous. 

How does the government trace bitcoin?

Tracking Bitcoin transactions is not an easy task because it requires a lot of time as well as the required tools and expertise. However, in recent times, centralized crypto exchange platforms have made life easier for the government by enforcing Know-Your-Customer (KYC) policies that require users to provide personal information. 

By observing and examining the transaction patterns, experts in blockchain analytics can assist the FBI in deanonymizing and identifying the people involved in Bitcoin transactions.

Companies like Chainalysis provide services for blockchain monitoring and analytics. These companies assess whether specific Bitcoin transfers between wallets are associated in any way with illegal activity, and they may collaborate with the FBI to help with the global tracking of particular cryptocurrency funds.

Possibility of recovery:

Most of the time, local authorities lack the expertise, resources, and capacity needed to look into international crimes or reclaim cryptocurrencies from private offshore wallets.

For instance, recently Mixin Network was attacked and hacked where people lost over $200M. Now local authorities may not help in such situations.

The best way to conduct investigations is still through the joint efforts of the FBI and Department of Justice crypto task groups. The difficult part is convincing the proper authorities to accept and then look into a crypto case.

In addition to the dramatic rise in fraud, there has also been a noticeable increase in referrals. As a result, there is an increasing backlog of complaints that federal officials can not possibly handle.

The threshold losses for an investigation and a prosecution have increased. Losses below the million dollar mark might not be given priority.

The money can be tracked even as it moves between anonymous accounts since every transaction is logged in a public ledger. That implies that law enforcement with the necessary resources and expertise can usually hack into an account and take the money back.

However, because it can be expensive and time-consuming, only a small number of organizations outside the F.B.I. are capable of hacking.

Challenges faced by the FBI:

For the FBI, recovering stolen cryptocurrency can be difficult because of its decentralized and anonymous nature. 

It can be challenging to follow transactions made with virtual currencies because of the way the systems are set up and the ways that they enhance privacy.

Even if a researcher is able to successfully track a transaction, it might be tough to link a virtual account to a real-life person. 

This process is made more complicated by decentralized systems, where client records are no longer held by a single organization.

It is also not easy for the FBI to work with international law enforcement because crypto transactions can take place across borders.

There is also a lack of regulation, which means there is no central authority to control transactions and reclaim money or cryptocurrency that has been stolen.

These are the challenges that the FBI faces when investigating the whole process, but somehow  they have succeeded in recovering funds.

In some cases, the FBI and crypto-tracing companies have been able to recover cryptocurrency. For instance, in the case of the Colonial Pipeline ransomware attack, the FBI was able to recover about $2.3 million of the $4.4 million paid in Bitcoin as ransom with the aid of tracing experts. 

The FBI seized more than 50,000 bitcoins in November 2022, totaling an incredible $3.36 billion. Years earlier, James Zhong had stolen Bitcoin from the infamous Silk Road market. This was a successful investigation, even though it took the authorities more than a decade to locate and recover the stolen money.

As you can see, the FBI has only been able to locate bitcoins with a value of millions to billions. How can a regular person who has only lost a few bitcoins recover them?

It is advised to think twice before relying on the FBI because it will take a long time to get your bitcoin back.

What to do when FBI can’t help you recover stolen funds?

When FBI and crypto changes like Coinbase can’t help you recover your stolen funds, you should not get disappointed.

There are bitcoin recovery services like Online Investment Scams that has Bitcoin scam recovery experts who can assist you in getting back any stolen cryptocurrency as soon as possible and have a successful track record.

Law enforcement agencies struggle greatly, take a long time to recover bitcoin, and only monitor crypto assets worth billions and there still are pending cases which FBI have not solved yet.

Bottom line:

It is a good idea to inform the FBI about the situation if you have been the victim of crypto theft. It at least provides you an opportunity for your issue to be taken up and looked into.

However, there is no assurance that this place would treat your report seriously. Furthermore, even if the FBI launches an investigation, the return of your stolen cryptocurrency is not guaranteed.

It is difficult to admit, but many crypto theft cases never get solved, whether it is because of carelessness, a lack of resources, or the complexity of the crime itself. This is why it is crucial to research the cryptocurrency platforms you wish to use and pick the safest wallets you can.