Crypto Theft: Challenges, Options, and Emerging Lawsuits

Today, let’s explore how blockchain technology has evolved, examine the rules and regulations in different countries and settings, and learn about the process of taking legal action for crypto theft if you have fallen victim to a scam.

Here is how it all started and evolved.

In the late 2000s, people came up with blockchain technology, and at the same time, they made cryptocurrency to help manage it. But instead of just using cryptocurrencies for managing things, people started talking about them as something valuable on their own. 

Right now, big groups from different countries are arguing about how to treat cryptocurrencies—like regular money, things you can trade, or maybe something totally different.

Because there are no clear rules and laws about cryptocurrencies, their prices can go up and down a lot. This is a big reason why more and more people are tricked by crypto scams.

Another problem is how the blockchain works. Once transactions are made, they are usually permanent, and most people in the system have to agree before anything can be changed or erased.

This feature makes cryptocurrencies interesting for bad guys who want to steal or hide money in ways that are hard to fix. Governments and groups in industries are still figuring out how to make rules for cryptocurrencies as they get more popular.

So, how can regular people notice, tell someone, and maybe even take legal action if their cryptocurrency is stolen? We’ll talk about that in this article.

Understanding crypto theft:

Cryptocurrency theft is the wrongful act of taking someone’s digital money by force. Such scenarios can be realized in various ways, such as when one hacks into a digital wallet belonging to another person or even dupes him or her into giving away the account details.

One example is that a person could secretly install any software on your computer. It is known as a keylogger, which listens to what you type and captures sensitive data; for instance, it can include your password or private keys. Consequently, this malicious individual will use these records to control your cryptocurrency.

Phishing is another way. In fact, it’s one of the biggest scam that people are facing for years. It’s like a digital trick where a scammer pretends to be someone you trust, like a company or friend.

They might send you an email that looks real, asking you to click a link and log in to your cryptocurrency account. But then, when you do that, you give your information to a bad person, not a legitimate company.

An other could be romance scam or pig butchering scam, it’s also increasing over time.

Statistics of the Rise of Pig Butchering Scams

Similarly, there are many other challenges that investors often face.

Challenges to Preventing Cryptocurrency Theft

Well, everyone knows the techniques that cybercriminals use to commit crypto-stealing. However, despite increased public consciousness of online fraud, there are various inherent risks in crypto-platforms that increase their vulnerability to cybercrime.

Weaknesses of digital wallets

Just like a wallet that you have in your pocket or handbag, a digital wallet is a place where you hold your cryptos.

But instead of coins and banknotes, cryptocurrency is saved as a computer file containing pieces of data representing money. Blockchain technology logs ownership of this data but tracking these assets’ movements can be hard, just as it is hard to tell where your paper cash comes from.

For this reason, somebody whose digital wallet has been robbed by an illegal hacker will be helpless.

Decentralized crypto exchanges

According to proponents, one of the main attractions of cryptocurrency is that it is decentralized.

This means that rather than being controlled by a central authority and its intermediaries like traditional banks do, it operates on a distributed network of computers with no single owner.

Decentralization increases privacy, transparency, and censorship resistance, but it also means there is nobody to blame when things go wrong.

It poses several challenges, including the absence of authorities to arbitrate disputes or mediate users’ clashes for them to solve disputes in fraudulent transactions and identity thefts.

Another challenge is the need for users to be responsible for themselves. If you were scammed, for example, your funds could be recovered by a bank, but this will not happen with crypto platforms.

Few government regulations

Cryptocurrency platforms are less controlled by a central authority, making them less regulated by the government.

While some view this as a good thing, it means that security mechanisms against unauthorized access or security breaches are few.

For instance, password management on cryptocurrency platforms may not be as strict. Additionally, their two-factor authentication and data encryption systems might be weaker than those used by banks.

Moreover, they may lack the same fraud prevention measures, physical defenses, and knowledge of your customer’s KYC checks.

Options to sue for crypto theft:

There are a number of issues that can crop up if you were to sue in case your bitcoins were stolen. However, it does not mean that one can’t sue at all; there are still legal options.

Justice could be pursued in several ways. This might include making reports about suspected crimes to local authorities, assisting them in investigating such crimes, or eventually taking them to court.

This is supposed to impose responsibility upon law offenders by making them pay for their actions that destroy people’s sanity. As such, it is necessary to turn it over to the law, which will make things right for someone who has been harmed.

There are organizations such as the CFTC, SEC, and FTC in the USA that deal with crypto fraud cases.

For instance, there is a crypto fraud enforcement unit operating under the FTC. If you were scammed and you want your money back, these agencies could be of much assistance in lodging your complaints.

You can suit against a scamster anywhere, even in a foreign territory. Well, it’s not as easy as this but you can do it! You must understand which police force deals with scams in that state.

Also, it is equally important to hire an attorney who understands the laws of such a jurisdiction. You can also seek assistance from advocacy firms specializing in legal matters with cross-border implications.

They have the experience and resources to guide you through the complex legal systems of other countries around the globe.

These are the most successful methods for suing for cryptocurrency theft; nevertheless, the courts encounter the following challenges when pursuing legal action against con artists.

Understanding jurisdictional challenges

Dealing with illegal activities involving crypto is challenging. One big problem is that the user of crypto has a chance to stay anonymous.

Crypto transactions are different from ordinary fund transfers in that you can easily know what happens to the funds and identify the individuals involved. Thus, it becomes a big dare to catch and prosecute such criminals.

Nevertheless, retracing stolen funds in a blockchain environment remains a huge task. Besides, decentralization and privacy make it hard for governments to trace where these stolen funds end up.

However, this does not mean investigating alleged blockchain records should be straightforward just because they ought to be open and unchangeable. If there were any chance of recovering or returning lost coins under such circumstances, it would require great intelligence coupled with sophisticated equipment.

Additionally, this same issue arises when investigating cases of cyber theft involving crypto currency. Digital assets are decentralized, so they cannot be addressed by traditional law enforcement agencies. Nonetheless, this assignment often becomes quite complicated, especially when crimes go international and include the criminal codes of different states.

More People Sue Companies Over Crypto Hacks, but it’s Uncertain if They’ll Win

Crypto thefts have resulted in Apple and Coinbase facing multiple lawsuits from different people within the past year.

The report shows that there were more cases of law-suits in 2022. From less than ten a year, it rose to twenty. For instance, AT&T has pending cases with blockchain wallet providers and crypto exchanges.

Therefore, these firms should be held accountable for several claims whose amounts range from a few thousand dollars to tens of millions because they let their coins be hacked.

Cryptocurrency’s increasing use and cybercrime are the reasons behind this surge in litigation.

This is a hard case to win because there are no steadfast rules for it and some legal glitches can hinder its hearing in court.

Although some experts argue otherwise, such suits matter because not everyone will recover their funds. They also recommend actions that companies should take to protect their clients in matters relating to digital currencies.

Consequently, it is unclear whether these lawsuits will be successful but they make companies think about how they should manage people’s crypto more carefully.