Can I Recover Crypto Scam Funds From An Exchange?

Lost money to a crypto or trading scam? Read this first:

If your losses exceed £3,000 (in the UK) or $10,000 worldwide The Crypto Adviser can offer advice on recovering your funds. 

>> GET IN TOUCH

Finding out you’ve been caught up in a crypto scam can be devastating, especially if your losses are going to materially affect your life.

When the realisation dawns that you’ve been taken in by scam – often after being approached by a stranger online – it’s easy for panic to set in.

“What am I going to do?”, “How am I going to keep a roof over my head?” and “How shall I tell my partner?” are some of the questions scam victims ask themselves.

But the most important question that people want answered is: “Can I get my money back from the scammers?”.

This is a question I get asked a lot, but a lot depends on:

• What kind of scam have you been caught up in.
• Where the scammers are located.
• The process used to transfer funds to the scam.
• Which banks or crypto exchanges were involved.
• The sum of money you’ve lost.

This guide focuses on the ways stolen crypto can be traced to accounts used by scammers on crypto exchanges, and how it might be frozen or recovered.

> If you’ve been scammed and lost more than £10,000/$10,000 get in touch for FREE crypto advice.

Is it worth contacting my bank and the police?

Having spoken to many victims of crypto scams, the first thing people generally do is contact their bank because in most cases this is how the funds were transferred to the scammers in the first place.

Some people have had some success here, but the vast majority hit a brick wall when trying to recover their funds this way.

The police, while generally sympathetic and helpful, simply don’t have the resources or jurisdictional powers to chase down scammers across the globe.

Having exhausted these routes, victims turn their thoughts to the exchanges involved in the scam.

How to recover scam funds from a crypto exchange

Many scams, especially those known as pig-butchering scams, rely on victims using cryptocurrency to transact because of the increased layer of anonymity that it offers.

Not all coins are created equal though, with Bitcoin being far easier to trace than, say, Monero.

However, there’s no doubt that it can be hard to follow crypto around the globe, especially as the scammers use various tactics to avoid detection.

An example of this is the use of Bitcoin mixers which can further anonymise stolen funds, although these services are not always used for fraudulent reasons.

Once the scammers have hooked in a victim, one of the first things they get them to do is open an account on a mainstream exchange, if they haven’t already got one.

That way, the victim can transfer cash from their bank to the exchange, convert it into crypto before sending it to a wallet controlled by the scammers.

Often this takes the form of the stablecoin USDT (Tether), or well-known and easily exchangeable cryptos such as Bitcoin (BTC) or Ethereum (ETH).

It’s this wallet belonging to the scammers that becomes the focus of attention in any recovery effort.

Scammer’s wallets can be frozen

If the wallet belonging to the scammers is created on a crypto exchange, then it potentially becomes traceable.

Even if the scammers are using a self-custodial wallet, at some point they’ll need to turn their coins into cash and in most cases, this will mean using an exchange.

Because of the strict AML and ID checks that exchanges are now required to carry out when someone signs-up, it’s possible that the scammers will have to reveal some genuine details about their identity in order to create an account.

This means that if the scammer’s wallet is on an exchange, it can be potentially frozen, and the funds recovered.

Of course, the scammer might be using other means to offload their coins and turn them into cash, such as AML-free peer-to-peer trading or a crypto fence or money launderer.

But tracing crypto to a scammer’s exchange account has proven to be a reasonably successful method of recovery.

Contacting a crypto exchange after a scam

If you’ve been scammed, you’ll need help to trace the wallets used by the crooks.

Often this involves using the services of a scam recovery company (which I’ll talk more about later). If they’re able to trace the wallets to an exchange you’ve basically got four options:

• Get the company to contact the exchange on your behalf if they offer this service.
• Take on private legal representation.
• Approach the exchange yourself.
• Pass on the information to the authorities.

The first two options will involve a significant cost, but it may be your best chance of a positive result.

There are legal firms dedicated to helping scam victims recover crypto cash from exchanges and other financial institutions, but they are expensive.

However, there’s no guarantee that you’ll be able to recover your funds, so you need to balance this against how much you’ve lost.

If you decide on the DIY route, then the only cost to you will be your time.

It can be a complex process and you’ll need to follow it through to the end to be in with any chance of success.

In most cases you’ll also need to involve the police at some point anyway as exchanges may require a crime reference number or proof that you’ve reported the scam.

One thing’s for sure though, it will be a lengthy process so if you’re expecting to get your crypto back straight away, you’re out of luck unfortunately.

How can I get my money back from a crypto scam?

There’s no doubt that securing the return of your crypto can be difficult, but if you’re going to pursue the scammers there are few things you should do:

• Keep a note of all the platforms used and the names/URLs. This includes the social media platform or dating website that you were contacted through, any platforms used in the scam, such as a WhatsApp group, and the URL of any fake crypto exchanges you were directed to.
• Note down all the crypto wallets used in any transactions made to the scammers. They will have to give you this information to facilitate the transfer of funds so make sure you don’t lose these details. Quickly cut and paste the information into a document as soon as it’s revealed to you.
• The scammers may call you on the phone so keep a note of any numbers that you can, together with the names they use. Also note the time of the calls. Try to record any calls if you can.
• Record any other information related to the scam, however insignificant it may seem, as this helps the authorities/exchange with any action they may take.

You’ll need this information for whoever you approach regarding the scam and the return of your coins, whether it be an exchange or the police.

Bear in mind that some or all the information given to you by the scammers will be fake.

It’s highly likely that the person who first approached you, say it was a European woman, won’t be who they claim to be and that they’ll have used fake information and a stolen profile image.

If a WhatsApp group was used it’ll be quickly shut down, likewise fake crypto exchanges pop-up all the time. They’ll remain active for a few months until they’re called out as a scam or served their purpose then close.

Likewise, phone numbers and email addresses are disposable so expect these to only be active for a few months.

A red flag on any crypto platform is a Gmail address being the only point of contact. No legitimate platform would operate this well.

You may also like: 20 ways to spot a crypto scam

Crypto recovery companies – are they worth it?

One other route that’s worth considering is using the services of a dedicated crypto recovery company to help track down your stolen cash.

These firms are often staffed by private investigators, ex-law enforcement agents and cyber experts who use a variety of techniques to trace your stolen crypto and attempt to recover it.

They can undertake:

• Deep blockchain analysis to trace crypto across exchanges, wallets and hopefully to individuals.
• Forensic examination of fake crypto platforms set up as part of the scam. This can include examining domain registrations.
• Other investigative techniques, sometimes in partnership with official agencies and lawyers to track coins and the scammers.

Crypto recovery companies generally charge an up-front fee which can be significant. Others may charge a percentage of the funds recovered.

Because of the fees involved, most companies set a minimum loss value per client before they’ll take on a case. This is usually £10,000/$10,000.

Given the cases I hear about at The Crypto Adviser on an almost daily basis, they’ll have no shortage of business. It’s not uncommon for scam victims to have lost tens of thousands to the fraudsters.

> If you’ve been scammed and lost more than £10,000/$10,000 get in touch for FREE crypto advice.

I’ve also seen cases of people borrowing huge sums from friends and family, often to chase losses, or even re-mortgaging their homes in the belief that the investment scheme will make them millions.

Educating yourself is key to avoiding scams

These unfortunate situations show that it’s vitally important to educate yourself about scams in general and any area where you’re planning to invest money, especially if you don’t understand it.

One of the reasons so many people are being caught up in crypto scams is that it’s such a nascent asset class which still has a ‘Wild West’ feel to it.

Many people still have no idea how Bitcoin or blockchain work, but they view them as a magic money tree, having seen crypto millionaires flaunting their wealth on social media.

Even when the scammers are promising ridiculous and completely unattainable returns via an obscure website, people are still being duped.

Need more help?

If you’ve been caught up in a crypto scam or are worried that you’re about to lose money to one, we can help.

We offer one-to-one consultations where you can discuss your concerns, together with written reports on crypto platforms to give you an idea of whether you’re about to lose your money or not.

For more details about our services and the fees involved visit our Advice Services page.

We’re happy to have a free chat before you commit to a consultation or report, so please get in touch and we’ll email you back as soon as possible.

Related post: Crypto scam help and resources