Considering that there are millions of dollars at stake and a rapid pace of innovation based on open source architecture, DeFi protocols are a good target for hackers. THE Challenge space entered the world with many cool features and the promise of becoming the future of finance, but new cyber scams also followed.
In April 2023, Michael Bentley, the co-founder and CEO of Euler Labs, the company behind the Euler Finance protocol, tweeted that the days following the hack were the hardest of his life. In the case of Euler Finance, a flash loan the attack happened.
April 2023 was also not a good month for another DeFi protocol. DEUS Finance lost over $6 million in a weekend hack that exploited a vulnerability. Blockchain security firm PeckShield said the hack targeted DEUS Finance’s stablecoin on the BNB Smart Chain and Arbitrum networks.
Those interested in crypto have also heard of other terrifying stories. It seems like everyone who follows crypto is aware of these numbers. While some hacks are associated with network vulnerabilities, smart contracts, or market manipulation beyond the control of ordinary users, individuals typically fall prey to a number of scams, such as phishing, crypto-mining scams and rug draws.
Unlike other traditional payment methods, stolen cryptocurrency is not easy to recover. For example, you may notice a strange charge on your credit card or bank account that looks like a potential fraud. It has become easy to use credit cards because you can dispute a fraudulent charge in order to get your money back. All you need to do is contact your credit card issuer or bank immediately and let them know that this is an unauthorized transaction.
On the other hand, cryptocurrencies do not include built-in consumer protection. Crypto is not covered or insured by any government-sponsored programs and regulations intended to protect consumers and investors.
Centralized financial systems usually include insurance for a particular amount. For example, the US Federal Deposit Insurance Corporation (FDIC) covers all deposit accounts for a standard amount of $250,000 in the event of financial institution insolvency, but this does not include crypto assets.
Even if decentralized finance has done many wrongs associated with traditional finance law, the question of insurance and consumer protection remains. Many users trust a number of crypto wallets and exchanges relevant to financial transactions. However, it is not easy to recover funds in the crypto environment.
Also, keep in mind that cryptocurrency is a bearer asset. Owning a bearer asset means that it is the user who owns it. Simply put, whoever holds the private key is considered the owner. This contrasts with credit assets which involve a third party holding your assets for you.
Think of this as the difference between buying groceries with cash and buying groceries on credit. Unlike buying on credit where the bank transfers the money, when you buy groceries with cash, you physically own that money. Someone could take that money from your hands, run away and become the new owner.
With bearer assets, it is difficult to prove ownership. This is why stolen or lost private keys make it difficult for a successful recovery process.
Apart from situations where hackers exploit vulnerabilities in a particular technology to steal funds or manipulate the market with respect to individuals, hackers typically use social engineering techniques such as phishing scams or fake emails. emails to access it. If a transaction goes wrong and your wallet has been compromised, it is essential to act quickly.
Here are some typical activities that end users can try to recover stolen funds:
If you held your lost funds in a well-known exchange, the platform is likely aware of the hack and has probably started working on a recovery process. Since decentralized exchanges and crypto, in general, are not government backed, it is possible that not all of your assets will be brought back.
However, cyber scams are considered crimes in almost all contemporary penal codes, so you can also report them to the police. It works for all sorts of crimes related to the virtual world, from DeFi hacks to NFT scams.
If you don’t know where to start, you can hire a recovery expert. Recovery experts are also known as crypto hunters. As the name suggests, a crypto hunter is an individual or company that searches for lost or stolen crypto assets on behalf of their clients.
Crypto hunters work with crypto holders and law enforcement to recover lost or stolen crypto assets. Experts can also help with the process of recovering lost private keys and passwords.
However, be careful when hiring experts. Some crypto hunters may themselves be scammers claiming to help you recover your funds while taking your money at the same time. These are secondary scammers posing as legitimate businesses in the crypto recovery niche.
Although this does not mean that you will get your funds back, you may decide to go down the litigation route. When you report a cybercrime to the police, law enforcement investigates the matter further.
Hiring a lawyer with extensive knowledge of crypto scams can file a complaint with the relevant authorities and take legal action. For example, in 2021, BitConnect, a US-based cryptocurrency platform, was shut down by the US SEC for conducting a Ponzi scheme. The company was held liable for its fraudulent activities.