Are Crypto Recovery Services Legit? Beware of Scams

Why Trust Techopedia

There are so many ways to lose your cryptocurrencies. Your wallet can be hacked, or you may fall prey to a crypto scam. If you are unfortunate enough, you could also be a victim of exchange failure, as we saw when Sam Bankman-Fried’s FTX exchange went bankrupt in 2022.

Other times, the blame could solely be on you if you send tokens to the wrong address or if you lose your wallet’s secret recovery phrases.

That’s why crypto recovery services are so important. But are there any legitimate crypto recovery services today? Aren’t most crypto recovery services scams? Let’s find out.

Key Takeaways

  • The majority of crypto recovery services available online are scams.
  • There are a few legitimate crypto recovery services. Their power to recover your lost crypto will depend on your circumstances.
  • Scam crypto recovery services have professional-looking websites.
  • Crypto recovery cases from Mt. Gox, FTX, and Gemini Earn were successful because of bankruptcy litigation processes.
  • Mt. Gox claimants had to wait nearly a decade to recover their stolen Bitcoin.

What Are Crypto Recovery Services?

Crypto recovery services are solutions that offer to recover stolen cryptocurrencies and locked wallets.

Unfortunately, the majority of crypto recovery services available online are scams. Therefore, the onus is on us as crypto users to manage our cryptocurrencies properly and safeguard them from hacks and scams.

There are a few legitimate crypto recovery services out there. However, their power to recover your lost crypto will depend on your circumstances.

Advertisements

For example, if you lose your cryptos to a hacker, it is close to impossible to get your cryptos back.

You may have better luck retrieving your crypto if you lose it to a bankrupt centralized exchange. However, crypto asset recovery in such instances tends to take a long time due to the lengthy litigation process involved.

If you are locked out of your crypto wallet after losing your secret recovery phrases and password, you may have a small chance of recovering your crypto wallet, depending on the brand of the wallet and the device it was installed on.

How to Spot Crypto Recovery Service Scams?

Here are a few pointers on how to spot and avoid crypto scam recovery services.

  1. Beware of Professional Looking Websites
    Just because a website looks professionally made does not make it a legitimate crypto recovery service. Look for spelling mistakes, verify their office addresses, read reviews on online forums, and scrutinize their “about” page.
  2. Beware of Fake Testimonials & Reviews
    You should remember that anyone can write a fake review about a company, product, or service. Look for genuine stories about the service on online forums and social sites such as Reddit, Quora and X.
  3. Beware of Companies With No Address or Contact Number
    Scamsters do not provide legit addresses and contact details on their website. If you suspect a scam company, verify their address and contact details.
  4. Look out for Services That Ask for an Upfront Payment
    Crypto recovery scams are known to ask for advance payments. Always verify and double-check before making payments.
  5. Never Share Sensitive and Financial Information
    Scammers may ask for access to your crypto wallet or bank account to aid in their “crypto recovery services.” Never share your passwords and secret recovery phrases.

Scam Crypto Recovery Services Schemes

Here are schemes that victims of fraud and scam often encounter, according to the Commodity Futures Trading Commission (CFTC). If you are looking for crypto recovery services for your stolen tokens, remember that scammers are targeting victims like you.

  1. Faked News
    According to CFTC, recovery scams gain access to local news websites after creating their fake websites with fake reviews and ratings. The scammers write a press release about recovering from fraud, success stories and latest technologies. These press releases are distributed to news outlets.
  2. Recycling Victims
    Recovery scams are known to use the personal and contact information of existing victims to pose as a government official, an attorney, or a recovery service representative. Victims are often told that most or all their money will be returned if they first pay a small donation or a retainer.

CFTC warned:

“If you recently lost a portion of your savings or retirement nest egg to a cryptocurrency, forex, or binary options scam, an offer to recover your lost funds may sound very appealing. Unfortunately, for many victims of fraud, the offer may be another scheme that adds insult to injury.”

Examples of Successful Crypto Recovery Processes

1. Mt. Gox

Mt. Gox was a Tokyo-based crypto exchange that operated between 2010 and 2014. During its peak, the exchange was responsible for over 70% of global Bitcoin (BTC) transactions.

In early 2014, Mt. Gox abruptly ceased operations, closed its website, and filed for bankruptcy after revealing that the exchange lost 850,000 Bitcoins (worth $58.65 billion as of June 3, 2024) belonging to customers. The loss was attributed to hackers.

According to CoinDesk, Mt. Gox has begun refunding customers their Bitcoins. The now-defunct exchange plans to repay creditors before October 31, 2024.

The Mt.Gox Bitcoin recovery has taken nearly a decade, which serves as a reminder to crypto users to always do their due diligence before using a centralized exchange.

2. FTX

When FTX Exchange filed for bankruptcy in November 2022, it held “only 0.1% of the Bitcoin and only 1.2% of the Ethereum customers believed it held.”

Luckily for FTX account holders, they did not have to wait 10 years to see the completion of the crypto recovery process. According to FTX, bankruptcy lawyers will recover $14.5 billion to $16.3 billion from divesting FTX’s investments in several crypto startups.

According to a consensus-based plan of reorganization, 98% of FTX creditors will receive 100% of their claims back and 9% interest as compensation.

The crypto recovery will take place within 60 days of court approval.

John J. Ray III, Chief Executive Officer and Chief Restructuring Officer of FTX, said:

“We are pleased to be in a position to propose a chapter 11 plan that contemplates the return of 100% of bankruptcy claim amounts plus interest for non-governmental creditors.”

He also thanked “all the customers and creditors of FTX for their patience throughout this process.”

3. Gemini Earn

On May 29, 2024, US-based crypto exchange Gemini announced that it would refund $2.18 billion worth of cryptocurrencies to users of its lending program Gemini Earn, who had lost access to their cryptos in November 2022.

The company said that claimants will receive a 232% recovery to account for the appreciation of assets lent to the Gemini Earn program.

Gemini said the crypto recovery process will take place within the next 12 months.

Founders of Gemini exchange Cameron and Tyler Winklevoss said:

“It’s important to note that the Genesis bankruptcy was not a crypto problem. It was old-fashioned financial fraud compounded by a lack of regulatory clarity. To that end, we will continue to fight for clear rules and guidance for our industry that foster both innovation and consumer protection. And we will win this fight.”

The Bottom Line

Losing your crypto assets to hacks, scams, and exchange failures is a distressing experience.

In the instances of successful crypto recovery processes mentioned above, the claimants had to file lawsuits and wait years to see their cryptos recovered. Luckily, they had the legal system to support their claims.

However, you may not be so lucky. Therefore, it is important to safeguard your passwords, back up your SRPs, and conduct due diligence before using new websites and services.

FAQs

What are crypto recovery services?

Is it possible to recover lost crypto?

How can I recover my Bitcoin from a scammer?

Has anyone recovered stolen Bitcoin?

Advertisements

Related Reading

Related Terms

Advertisements
Mensholong Lepcha
Crypto & Blockchain Writer
Mensholong Lepcha
Crypto & Blockchain Writer

Mensholong is an experienced crypto and blockchain journalist, now a full-time writer at Techopedia. He has previously contributed news coverage and in-depth market analysis to Capital.com, StockTwits, XBO, and other publications. He started his writing career at Reuters in 2017, covering global equity markets. In his free time, Mensholong loves watching football, finding new music, and buying BTC and ETH for his crypto portfolio.