Losing cryptocurrency to a theft is a “bad day”, but how can you recover stolen USDT tokens? Is it possible to prevent stolen USDT from being sold by the attackers? What are the chances to return the stolen USDT? This article has every question answered.
Table of Contents:
- How common is USDT theft?
- How can USTD be stolen from me?
- How to prevent stolen USDT from being sold?
- What will happen when the stolen USDT is blocked?
- What are the chances to recover the stolen USDT?
- How to recover a stolen USDT?
How common is USDT theft?
USDT is one of the most popular stablecoins, accounting for 83B$ of cryptocurrency market share, and one of the favored targets among cybercriminals. There are two different types of USDT theft — targeted and part of the bigger attack.
USDT theft can be a part of a bigger attack. For example, Atomic Wallet hack in June of 2023 caused victims to suffer almost $40M in total losses. According to Atomic Wallet officials, attackers managed to exploit a security vulnerability, which affects «less than 0.1%» of the 5 million users, giving a rough estimate of 35,000 to 50,000 victims. Open source investigation revealed more data of the case, with total losses surpassing $35M USDT, five top wallets losing $17M and one major victim of the hack suffering loss of $9M in USDT.
USDT can be blocked even after theft. During the FTX hack in November of 2022, attackers used USDT tokens as one of the ways to withdraw funds from the platform and drain victim’s accounts. After the attack was confirmed by FTX officials, Tether Foundation proactively blacklisted $31,4M worth of USDT. Open data investigation revealed that blacklisted tokens consisted of USDT on Avalanche with $3,8M and $28M USDT on Solana.
How to prevent stolen USDT from being sold?
Tether Foundation implemented measures to control the USDT token. For example, stolen USDT tokens may be marked as fraudulent, frozen inside the attacker’s wallet to prevent further use or blacklisted. USDT wallet, involved with the crime operation, can be banned by the trading and exchange network, resulting in formal seizure of funds due to withdrawal lock for such accounts. But all of this — with a time delay of 1 to 5 business days.
Let’s break down a real world scenario of a targeted USDT attack. Details of such cases are not for the public eye, but here’s how they look at the investigative part of things. On the screenshot below you can note how the victim transferred $110k in USDT, which was then split and cashed out at the SunSwap V1 protocol by the attacker.
Victim of USDT theft turned too late // Source: StarCompliance.io
Step by step breakdown of the USDT attack.
- Victim transfers money to a courier wallet, which then instantly sends them towards a hoarding wallet.
- One by one, the attacker splits funds into small payments in order to mask the whole sum and send them to the nearest exchange point without KYC — the SunSwap V1.
- Because USDT was unmarked, the SunSwap V1 protocol accepted tokens as legitimate and allowed the exchange;
Both parties had exactly 12 hours to react. Given the USDT would be labeled as «Stolen» right away, the attacker’s would fail to sell the tokens and become reported by SunSwap V1 as «High Risk».
Hiring a dedicated team of professionals. Certified investigators will take care of tracing & marking for you. Dedicated team of lawyers will prepare an evidential basis to open a case in court, block USDT even on a cold wallet and help you recover the lost funds.
However, you can always try to do it yourself. Here are the 5 solutions used by professionals to prevent the sale of stolen USDT:
- Marking the stolen USDT. By utilizing the network of certified investigators, coins are labeled as «Stolen»», which in turn makes them useless for the attacker. Marked coins are accepted by all major trading platforms only to be seized and transferred to the rightful owner;
- Exposing the attacker’s addresses to the scam network. Each of the addresses used by the attacker to transfer, exchange, keep and deposit stolen USDT are exposed and labeled as «High Risk». Labeled wallets are much harder to cash out from, paralyzing or damaging the attacker’s web of addresses;
- Labeling other attacker’s wallets. After the USDT deposit address of the attacker is known and exposed, it is possible to involve his other wallets with the case. By doing so, wallets involved with transfer of the funds from blacklisted addresses would be marked as «High Risk» by Chainalysis, DataWalk, Coinfirm and other investigative databases used by CEX’es to evaluate risks.
- Blacklisting the USDT tokens on purpose. One of the possible options is to blacklist the stolen USDT. Tether Foundation is obliged to block stolen tokens once the fact of their theft is proven, whether in court or by third-party expert investigation;
- Maintaining Wallet Paralysis. Filing a valid criminal case against the attacker’s USDT deposit address is a sure way to paralyze it. When a case is filled, such a wallet becomes «toxic» for the attacker’s transaction schemes, giving a reason to block the recipient’s wallets too and labeling every future transaction as «Risky».
What will happen when the stolen USDT is blocked?
Blocking the USDT will cause a domino effect. You see, to control the risks behind flow of funds, such platforms as Binance, OKX or Kraken utilize both — shared and private risk analysis networks. Shared risk analysis network is based on the blockchain itself, with every transaction and wallet being analyzed for AML risks. Private networks are shared only during AML investigation procedures by certified experts.
Every major CEX runs a blacklist of sorts, where records of all the fraudulent users are kept. These databases are shared between different platforms to ensure the highest level of user safety, and can be accessed by third-party experts during investigation. However, it is possible to warn 200+ platforms in under 1 hour about USDT theft by utilizing tools such as Chainalysis Reactor, DataWalk and Confirm software. Moreover, certified Chainalysis partners are able to mark fraudulent transactions as part of their services.
What will happen to the thief for holding marked USDT?
Here’s a non-exhaustive list of events, which are triggered by holding a marked USDT tokens:
- Wallet addresses exposure to the law authorities, cyberpolice departments around the world, as well, as major trading platforms. Once exposed, the address is labeled as «Suspicious», along with tokens and transactions involved;
- Related addresses are being suspected. Every wallet, connected to one hiding the stolen USDT, is then labeled as «partner in crime». From there every attempt at withdrawal of funds or their transfer will result in uncovering the web of wallets used for an attack;
- Transactions are being blocked. Holding stolen USDT is a hard choice, because once the fact of theft is established, tokens become not-transferable, even on cold wallets;
- Wallet Ban. Holding or transferring stolen USDT after they have been marked is a sure way to become blocked by the Tether Foundation. Moreover, involved wallets may become banned too, once such a relationship is confirmed or known.
- Exchange and trading ban. By holding stolen USDT, obtained through any of the trading platforms, it is possible to force a permanent identity ban for the perpetrator.
- Identity exposure. During Crypto Investigation, real life data of the thief are being passed to law authorities and cyberpolice departments around the world.
- Severe charges. Taking away USDT without the consent of their owner, hiding and holding stolen funds, involving different people in the operation — every step of the USDT theft is one step closer to the criminal court and AML charges.
What are the chances to recover the stolen USDT?
Here’s a 10 years of fund recovery summarized in a brief checklist:
- Valid owners of the USDT have the most chances. Once the fact of the ownership is established, the USDT holder has every right to return his stolen funds through the legal means;
- Speed and evidential basis are the two crucial factors. Gather chat logs, e-mail data or any other correspondence with the attackers. The faster you are able to do this, the more chances you have.
- Following a hot trail yourself isn’t always an easy win. Civil investigations, such as the case of searching for an address owner by yourself, are useful to gather evidence, but not always valid enough to launch a lawsuit;
- Providing Proof Of Funds will help. First and foremost — you need to have a legal basis for further actions. Having evidential documents on obtaining the USDT is a good way to do this.
How to recover a stolen USDT?
You can try doing it yourself by contacting Tether Foundation with an official token marking request, proceed with evidential basis and expect an answer from an organization whose main concern is how to handle $83B token. To do this, you need to find an AML lawyer, submit a case to the police and wait for the investigation results to provide an evidential basis for Tether Foundation. On top of that, you also need a court decision on theft of the USDT tokens.
Or you can contact StarCompliance.io and get help from a certified Chainalysis partner with over 90 successful cases of fund recovery totaling over $25,000,000 in financial damages restored to the victims.
How are USDT theft cases handled by StarCompliance.io during Crypto Investigation service?
- Victim applies for Crypto Investigation service. You need to specify details of the case, stolen currency and provide contact data.
- Funds are traced. Investigators carefully document incoming and outcoming transactions, unweaving the web of attacker’s wallets and tracing the flow of funds. From there, funds are located and chronology of the theft is being validated by third-party experts;
- Tether Foundation is warned. After the fact of theft is established, Tether foundation receives a priority request on token freeze, making stolen USDT worthless for the perpetrator;
- Address owner is exposed. By knowing the addresses used by the attacker, it is possible to identify them by performing KYC-investigation in relevant databases.
- Law is enforced. By establishing an attacker’s DOB, legal name and address of residence, certified AML lawyers open a case in their court of residence;
- Funds are blocked and ready for recovery. With enough evidential basis, such cases are resolved with court decision on refund, compensation of financial damages or seizure of theft’s property to cover the victim’s damages.
Reach us out at StarCompliance.io to get the following services:
- Warn 200+ platforms in under 1 hour about USDT theft.
- Stolen USDT Tracing, Markup & Blocking On Demand;
- Stolen USDT Recovery Services with Full Legal Support.
Begin your USDT recovery with StarCompliance.io today and save money for bigger goals.