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Crypto hunters are chasing stolen and lost coins

It was late in the working day when Joss Eynon logged into the Bitcoin wallet on his laptop for the first time in three years. In the last few weeks, the price of the virtual currency had skyrocketed. Eynon, a property developer, figured the roughly £5000 ($8972) he had invested in 2017 was now worth a lot more.

He was right. His wallet showed that the 1.8 Bitcoin he had from a few years ago was now worth more than £60,000. Eynon closed his laptop and decided he would figure out what to do with the money in the next week, perhaps putting some in his pension.

While the price of a Bitcoin has climbed from slightly over $US6000 a year ago to over $US60,000 in recent days, the risky nature of the investment is matched by a lack of financial protections around it.
While the price of a Bitcoin has climbed from slightly over $US6000 a year ago to over $US60,000 in recent days, the risky nature of the investment is matched by a lack of financial protections around it.

Later that night, when he checked again on his phone, it had vanished. Somehow, the cryptocurrency had been anonymously sent to another wallet.

“It happened within minutes, logging in using my laptop must have triggered something because I hadn’t checked it for years,” he says.

Eynon says he does not know to this day how his account was hacked and the Bitcoin stolen. He suspects hackers might have been sitting on his email account, or possibly that he ended up on a fake website where he entered his details. Emails to blockchain.com, the wallet provider he used, have proved fruitless, and the site would have little ability to reverse the transaction.

The loss illustrates the downsides of investing in Bitcoin, a decentralised, unregulated and largely anonymous system that advocates have positioned as the future of money and investing.

While the price of a Bitcoin has climbed from slightly over $US6000 a year ago to over $US60,000 in recent days, the risky nature of the investment is matched by a lack of financial protections around it. The same elements that make the virtual currency appealing to its backers – privacy and lack of government control – become downsides for victims.

Eynon says he can see where his money went, since every Bitcoin transaction is public, and every recipient has an online address. The problem is, those addresses are anonymous. Since transactions cannot be reversed without the recipient’s permission, he has little chance of getting it back.

He is not alone. According to Chainalysis, a company that tracks cryptocurrency movements, around 20 per cent of the Bitcoin in circulation – around $US220 billion – is lost or locked inside digital wallets. Around $US523 million was stolen last year, according to the company, up from $US344 million the year before. Millions more are lost to scammers, ransomware and Ponzi schemes. One owner, Josh Jones, lost $US40 million last year, in what is believed to be the single-biggest hack on an individual.

While today many people store their cryptocurrency on internet brokerages, outsourcing security and custody, purists often prefer to have dedicated wallets that give them full ownership and control – a piece of the blockchain that Bitcoin runs on. These are often downloaded onto hard disks rather than stored online, ensuring that physical access is required to use the Bitcoin.

The ghosts of Mt Gox, the world’s biggest exchange before it collapsed in 2014 following a heist that stole most of its customers’ Bitcoin, have lingered.

Others who used their computers to mine the cryptocurrency in its early days, kept huge quantities of what was then a near-worthless experiment on their computers.

Many of these holdings are worth fortunes, but are out of reach. Owners have forgotten the passwords, or lost the 24-word recovery phrase that allows access if a hard disk containing a wallet is destroyed.

Horror stories are plentiful. The man whose hard drive with 7500 Bitcoins, worth £318 million, sits in a landfill in Wales. The San Francisco programmer with two password guesses before his hard drive with 7000 Bitcoins is locked.

But while many may never recover the lost cryptocurrency, an industry is springing up dedicated to hunting for it: chasing down stolen Bitcoin or getting into wallets written off as lost causes.

One of those hunters is known as Dave Bitcoin. This is not his real name, and “Dave” is in fact two people: the operators of Wallet Recovery Services (WRS), a business that specialises in cracking open Bitcoin wallets.

“Dave”, who stays anonymous to avoid being targeted and talks only over an anonymous webchat service, says enquiries from people with stranded Bitcoin have increased threefold over the last six months as Bitcoin’s price has risen.

“If they found a wallet after many years, and now it’s obviously worth a lot more, it’s suddenly become a life changing amount of money,” says Dave Bitcoin. He says WRS occasionally cracks a wallet containing hundreds of Bitcoins – a sum worth millions. More often than not, it is a sum of thousands of dollars.

WRS uses an algorithm to attempt to guess passwords, taking a fifth of the wallet’s value if it is successful, which is around 35 per cent of the time.

The success rate on stolen cryptocurrency is lower. Companies such as Chainalysis can track Bitcoin around the blockchain, “tagging” it as stolen, but there is no central authority to seize it. To recover the lost funds, a criminal must slip up, transferring the money to an exchange in an attempt to convert it to usable currency. At some point, Bitcoin must interact with the real world.

“Unhosted wallets are by definition decentralised, so there is no central organisation to help with investigations. That’s why cashout points, usually exchanges, are important partners to law enforcement,” a Chainalysis spokesperson said.

In one case, a British exchange known as Dooga was able to recover $US32 million of lost Bitcoin when it ended up on two American exchanges, which subsequently froze and returned the cash. Criminals have become savvier though, converting Bitcoin to alternative cryptocurrencies that let them hide their tracks, or using less compliant exchanges based overseas.

Dave Bitcoin, of Wallet Recovery Services, admits that the ease with which Bitcoin is lost is a downside. He says it will become less of an issue as more investors choose to store their cryptocurrency on brokerages such as Coinbase, which was this week valued at $US68 billion, or invest in regulated funds and futures linked to Bitcoin, rather than the cryptocurrency itself.

“Back in the past, like after the Mt Gox disaster, you know, no sane person would leave their crypto on an exchange. Now you feel more comfortable.”

That is too late for Eynon, who is attempting to find an investigator to track down his lost Bitcoin.

“I wouldn’t say I’m blameless. I certainly wasn’t careful with it. With money in a bank, or shares with a stockbroker, people understand how it’s held and where it is. With crypto, unless you’re really clued up, people just don’t understand.

“It’s so opaque. It’s so different to everything else, because it doesn’t really exist.”

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Crypto Stats


CryptoCurrencyUSDChange 1hChange 24hChange 7d
Bitcoin55,105 1.93 % 0.65 % 8.14 %
Ethereum2,143.1 1.95 % 0.11 % 0.33 %
Binance Coin488.06 5.67 % 4.32 % 6.66 %
Tether0.9931 0.56 % 1.27 % 0.79 %
Polkadot43.88 0.58 % 0.43 % 36.39 %
Cardano1.200 2.73 % 3.68 % 5.34 %
XRP1.310 3.17 % 2.00 % 3.13 %
Uniswap29.99 2.50 % 2.38 % 0.27 %
Litecoin257.83 1.94 % 2.65 % 1.90 %
Chainlink36.50 3.80 % 1.83 % 7.94 %