Lost Crypto: Are There Ways to Recover Your Assets?

Crypto recovery isn’t a universal solution for every scenario. What can be done depends on how and from where the funds disappeared. So, first, we need to mention that there are multiple ways to store your crypto, each providing a different kind of user experience. These models differ from each other in their security structures and how much control users have over their accounts. Based on this, the two most popular methods of storing crypto are centralized and decentralized wallets.

Centralized crypto wallets, also called custodial, are managed by a trusted party, which can be a crypto exchange, a brokerage, or other financial service. You can buy and store crypto through a centralized wallet by opening an account. Mostly, the process is easy. You need to enter your name, last name, email, and other basic info. Platforms will provide you with step-by-step instructions. If you lose access to your wallet, it would be generally possible to recover with the help of your email or passkey. In case of technical issues, you can contact the platform’s support. Keeping cryptocurrencies on a centralized wallet means you need to trust the platform with secure management of your funds. 

The decentralized way of storing crypto is when you don’t rely on a third party. Instead, you use a self-custody crypto wallet which allows you to have full control of your assets. Getting started with a crypto wallet doesn’t require personal information. First, you need to decide which type of wallet you want to use: a software or hardware one. Software wallets work online. You download the app and create a wallet. Hardware wallets, on the other hand, work offline. First, you need to purchase the physical device and set it up on your computer. 

Both software and hardware wallets provide users with private keys that only they can see. Private keys enable control over funds and should not be shared with anybody. Upon creating a wallet, the app generates a seed phrase as a security mechanism to access the account. A seed phrase is a sequence of usually 12, 18, or 24 random words. It’s important to save the seed phrase in a secure place immediately, for example, split the words and send them to your accounts and people you trust, or write them down on paper, and save it somewhere safe. Otherwise, if you lose the seed phrase, recovering your wallet may be impossible. 

Crypto Recovery in Case of Lost Access to Wallet 

Self-custody crypto wallets give users full responsibility for storing their funds. This means there is no option to contact support if you have issues with accessing your wallet. Many crypto owners, especially in the early days of crypto, forgot where they put their hardware wallets or lost their private keys. If this happens to you, the first thing to do is to keep calm and look for backups. If you can’t recover the access on your own, there is one way that can help: hiring ethical hackers, who would try different technological tools and methods to regain control. For this, however, you would need to provide the hacker with some details: whether some words you remember from the seed phrase or if it's a hardware wallet, the physical device.

In 2022, hardware hackers helped Rhonda Kampert, a woman from the US regain access to Bitcoins she bought in 2013.  Rhonda learned about Bitcoin in 2013 through radio and got interested. She told BBC that although buying coins was not easy she found a way and bought 6 bitcoins, paying around $80 for each. After spending some of the coins, Rhonda forgot about the coins. Later, in 2017, when Bitcoin hit $20,000 and everybody was talking about it, Rhonda went back to her wallet to find out she couldn’t log in because some digits were missing from her printout. Although she kept her password on a piece of paper, she didn’t know what her wallet ID (pr public address) was. Rhonda’s attempts to recover her access failed. 

In 2021 when BTC reached $50,000, Rhonda tried again to bring her coins back. This time, she took another approach, and asked ethical hackers for help. Rhonda found father and son crypto treasure hunters Chris and Charlie Brooks through the internet. In a video call, she explained the situation, and Chris could open the wallet, which holds three and a half Bitcoins. Rhonda gave 20% of the Bitcoins to hackers for their work. A part of the remaining coins she spent for her daughter’s education, and decided to save the rest. To prevent the story from repeating itself, Rhonda remembered the login pin to her new wallet. 

Rhonda’s case was not the only one. More recently, electrical engineer Joe Grand could crack the password of a crypto wallet and unlock access to 43.6 Bitcoins that were stuck in the wallet for 11 years. The stories are pretty similar. Like Rhonda, the anonymous crypto owner bought Bitcoin years ago, lost access to the wallet, and tried to recover it when the price increased. In this case, however, it was an online wallet. The owner of the wallet used a random password generator tool called Roboform to create a password for the wallet. Luckily, Joe Grand with his friend Bruno could regenerate the password. In a YouTube video, the hackers explained that although password generators claim all created passwords are randomly generated, there can be clues to guess the outputs.

These stories show that recovering a wallet is sometimes possible. However, trying to do that only makes sense in the case of large amounts, because the process takes time, success is not guaranteed, and you would need to compensate the hacker for their work. 

Here are two scenarios: you mistakenly transfer crypto to the wrong address, either through a crypto exchange or a self-custody crypto wallet. In the first scenario, it’s necessary to contact the exchange’s support. The platform may have tools to address such situations and assist in recovering the assets.

If you send funds to an existing address by mistake, you can try contacting the owner, explain the situation, and ask them to return the crypto. Since blockchain transactions are private, you cannot see who the address owner is, but you can reach out through messaging platforms like Blockscan Chat. However, there is no guarantee that the person will see your message or respond.

Another scenario is when you send crypto to the correct address but on the wrong network. For example, you intend to send Ethereum tokens on the Ethereum Network but mistakenly select the Binance Network. In this case, you need to check if your wallet supports the Binance Network and add it to your account. After doing so, you will be able to see the funds on the added network and make a transfer using a bridge. Here’s a guide from Metamask if you’re interested in how to add a network to your wallet.

Falling victim to fraud and hacks is another common way of losing crypto holdings. Scammers employ various tactics, like promising high returns on investments or engaging in friendly conversations to convince targets to transfer funds. When you realize you were scammed, it’s better to prepare all the details related to the fraud, including screenshots of conversations, and report the case to authorities. Security experts may succeed in finding the thieves by using on-chain analytics tools, and transaction tracing techniques. If the platform where you've stored your funds gets hacked, the company will attempt to contact the hacker and security services to recover the assets. However, whether it will compensate users for losses or not is not certain. 

In traditional finance as well as in crypto, companies may face financial difficulties and go bankrupt. In 2022, news of the crypto exchange FTX’s bankruptcy and the arrest of its founder, Sam Bankman-Fried took the industry by storm. After this, other platforms, including Celsius, BlockFi, and Voyager announced bankruptcy. The platforms stopped operations, and users were unable to withdraw their funds. Currently, they are gradually returning user funds. In such a scenario, there’s not much to do, except to have the necessary information about your funds and follow the updates.