How to Recover Lost or Stolen Cryptocurrency Assets: Is It Possible? 10 Questions for the Expert

Taras Podhorodetsky, CEO of StarCompliance—a company that helps recover stolen cryptocurrencies and tokens—answered these questions and more.

Question 1: Let’s start with definitions. What constitutes cryptocurrency theft?

Taras Podhorodetsky: This is determined not by us but by the law enforcement authorities in the client’s jurisdiction. Our task is to locate the funds and provide recommendations for their recovery. Sometimes, the police are willing to work but only have a basic level of knowledge.

StarCompliance verifies the information provided by the client, but legally, the investigation is initiated by the authorities. Misleading them is subject to legal penalties.

Firstly, we are responsible only for the accuracy of information regarding wallets, transactions, and asset movements. Secondly, we assist the client and their lawyers in interacting with law enforcement agencies. And thirdly, we focus on achieving results.

Question 2: What does the result of your work look like: identifying where the funds went or the actual recovery?

Taras: Recovery. However, not all services are capable of finding cryptocurrencies if they are stolen by experienced criminals.

We continually test new software for tracking transactions and can assert that none of the 25 companies specializing in on-chain analysis offer truly universal solutions.

StarCompliance combines various software tools to create a comprehensive picture of fund movements. We also guide lawyers and law enforcement on how to draft requests that cryptocurrency exchanges cannot refuse.

Our advantage lies in our speed. Law enforcement might review 10-15 thousand transactions per month, while StarCompliance can do so within a week. This significantly accelerates the work of investigators, providing them with a ready answer to where the crypto assets went.

Question 3: How long does it typically take to recover the funds?

Taras: When dealing with stablecoin issuers, the recovery cycle can take up to two to three years. They block the wallet address relatively quickly, but the client does not receive the tokens immediately.

For instance, Tether has a specific procedure and issuance schedule for such situations. Typically, the company issues tokens quarterly. The larger the recovery amount, the longer the payment period.

Tether’s goal is to minimize its risks: wait for the investigation to conclude and ensure no other users claim these funds.

Exchanges respond to requests much more slowly. Many platforms are just beginning to hire staff to interact with law enforcement. Some exchanges, like OKX, already have dedicated teams with 20-30 people in such departments.

Question 4: What assets are clients most frequently asking you to track?

Taras: USDT. Our target audience consists of professional market participants and OTC traders. We continuously develop new, innovative products for them.

For example, StarCompliance recently launched a service that conducts AML checks on incoming and outgoing USDT (TRC-20) transactions. Users of this service also save up to 20% on blockchain fees.

Question 5: When do you plan to release this solution?

Taras: There will be no public release. The service is available to our current clients and those they recommend.

Question 6: Should ordinary investors who have fallen victim to fraud contact StarCompliance?

Taras: Each case needs to be evaluated individually. The main issue with victims of pyramid schemes and other scam projects is that they are often located in different countries, making it challenging to consolidate cases.

However, assistance can still be provided. We have tested several hypotheses and started developing a separate product specifically for such situations. We plan to launch it by the end of the year.

Question 7: Is it possible to recover assets on your own?

Taras: You can contact law enforcement, but my experience suggests that without a competent lawyer and on-chain analysts, it’s not very effective. You’ll end up just running from office to office without understanding the process and wasting critical time for asset recovery.

An alternative is to choose StarCompliance or one of our competitors. There are not many of them. Most offer only information about asset movements and charge around $30,000. For those who are more effective, prices start at $50,000.

For instance, one well-known on-chain analysis service has an investigative department where, according to my information, the starting price can exceed $100,000. A user who lost $200,000 is unlikely to want to pay half of their funds for a potential recovery.

We offer a personalized approach and provide an estimated cost of services only after a preliminary case assessment. When a client contacts StarCompliance, we analyze the situation within a day or even a few hours to determine if recovery is feasible.

We then work on a pay-as-you-go model, meaning we charge as the case progresses. Blocking is only 30-50% of the process. Recovery itself is a very routine process that can take up to a year or more.

Question 8: What should not be done in the event of cryptocurrency theft?

Taras: The main thing is not to remain inactive. I would also advise against relying solely on your own understanding of the situation.

Investigating cryptocurrency theft can be compared to medical treatment: there are “diagnostic” tools, algorithms for interacting with other participants in the process, and a multi-step recovery procedure. You wouldn’t perform a surgical operation on yourself; it should be done by a team of skilled doctors. The same applies to cryptocurrency recovery.

It’s important to understand that a call to the police does not guarantee a result. Sometimes investigators lack expertise, sometimes time, and sometimes both. The case may even be closed at the stage of filing the report.

Question 9: Can Law Enforcement Abuse the Trust of Victims?

Yes, I am aware of one case where several law enforcement officers are already behind bars. This is another reason to contact StarCompliance immediately: we not only track asset movements but also advise clients and lawyers on how to effectively interact with the police. In the crypto industry, the principle “trust but verify” is always relevant.

Question 10: What is Your Take on Transaction Anonymization Services? Is It Really Possible to Obscure Traces on the Blockchain?

I won’t disclose details on de-anonymizing funds that have passed through Bitcoin mixers—I prefer not to provide tips to criminals. Tools for tracking such transactions have been available for a long time.

It’s possible that the arrested developers have already cooperated with the authorities: revealing how much shadow money flowed through their services or explaining their algorithms to help law enforcement perform a retrospective transaction assessment.

I would advise against using mixers altogether to avoid potential legal issues. Instead, businesses should focus on integrating compliance into their processes, and ordinary users should concentrate on AML checks for transactions and secure key storage.

Can Stolen Crypto Assets Be Recovered?

Recovering stolen crypto assets is possible, but it depends on several factors:

1. Technical Feasibility: In some cases, if the stolen assets have been moved through a chain of transactions, they can be traced using specialized software and analytics. However, experienced criminals may use complex methods to obscure their tracks.
2. Collaboration with Law Enforcement: If the theft has been reported to law enforcement, they may initiate an investigation. The effectiveness of this process can vary depending on the competence and resources of the authorities.
3. Working with Experts: Companies like StarCompliance offer services for tracking and recovering cryptocurrencies. They can assist in locating stolen assets and liaising with law enforcement to facilitate their return. However, this process can be time-consuming and costly.
4. Type of Stolen Assets: The likelihood of recovery may depend on the type of cryptocurrency stolen and where it is held. For instance, recovering certain stablecoins might be easier compared to more anonymous cryptocurrencies.
5. Timeframes and Costs: The recovery process can range from several months to a few years, and the cost of services can be significant.

In summary, while there is a possibility of recovering stolen crypto assets, it is not guaranteed and requires active involvement and professional assistance.

Conclusion

Recovering stolen cryptocurrency assets is indeed possible, but it involves several complex factors. Technical feasibility, collaboration with law enforcement, and working with specialized experts are all crucial components of the process. The effectiveness and timeline of recovery can vary greatly depending on the type of assets involved and the resources available. Engaging professional services like StarCompliance can significantly improve the chances of recovery, especially given their expertise in tracking and working with law enforcement. However, it’s important for victims to act promptly and be prepared for a potentially lengthy and costly recovery process.

FAQ

1. How can I start the process of recovering stolen crypto assets?
   • Contact a specialized recovery service like StarCompliance to assess your case. They can provide guidance on the next steps and help you understand the feasibility of recovery based on the specifics of your situation.
2. What role does law enforcement play in recovering stolen cryptocurrency?
   • Law enforcement can initiate an investigation and potentially help recover stolen assets. However, their effectiveness varies based on their expertise and resources. Recovery services often work alongside law enforcement to enhance the chances of asset retrieval.
3. How long does it typically take to recover stolen cryptocurrency?
   • The recovery process can range from a few months to several years, depending on factors such as the type of asset, the complexity of the case, and the cooperation of involved parties.
4. What are the costs associated with recovering stolen crypto assets?
   • Costs can vary significantly. Basic information on asset movements may start around $30,000, while more comprehensive services can exceed $50,000. Some specialized services may charge over $100,000 depending on the complexity of the case.
5. Can I recover stolen assets on my own?
   • While you can report the theft to law enforcement, the process is often more effective with the help of experienced professionals and on-chain analysts. Attempting recovery without expert assistance can lead to wasted time and reduced chances of success.
6. What types of stolen assets are most recoverable?
   • Generally, assets like USDT (Tether) that are less anonymous and held on regulated platforms are easier to recover compared to more anonymous cryptocurrencies.
7. Is it possible to recover assets that have been mixed through services like Tornado Cash?
   • Recovery from transactions involving mixing services is more challenging but not impossible. Specialized tools and techniques are used to trace and de-anonymize such transactions, though using mixers generally complicates recovery efforts.
8. What should I avoid doing if my cryptocurrency has been stolen?
   • Do not remain inactive or rely solely on your own understanding of the situation. Engaging with professionals early in the process is crucial for maximizing the chances of recovery.
9. Can law enforcement officials misuse their position in cryptocurrency cases?
   • Yes, there have been instances of misconduct. It’s important to work with reputable recovery services that can help navigate interactions with law enforcement effectively and ensure proper handling of your case.
10. Are there any preventive measures to avoid falling victim to crypto theft?
    • Implement strong security practices, such as using secure wallets, conducting thorough AML checks, and storing keys securely. Regularly updating security protocols and staying informed about potential threats can help minimize the risk of theft.