Posted On April 26, 2022 Consumer Privacy & Data Breaches
Over recent years, Bitcoin, Ethereum, Litecoin and other cryptocurrencies have surged in popularity and value as more and more people see the value that the asset class presents. However, hackers see the fact that everyday investors are now holding cryptocurrency as a major opportunity. In fact, over the past year, there have been several high-profile cryptocurrency hacks resulting in the loss of more than $14 billion dollars.
Both investors who currently hold cryptoassets as well as those considering their first purchase should be familiar with the risks involved as well as their potential remedies in the event of a cryptohack. The cryptohack lawyers at Console & Associates, P.C. represent aggrieved investors whose cryptoassets were stolen, helping them seek reimbursement or other damages for the loss of their cryptocurrency.
In the early days of cryptocurrency, investors had to be tech-savvy just to figure out how to make a purchase. However, the proliferation of decentralized finance platforms and the growing acceptance of crypto assets by major brokerage houses put buying, holding and using cryptocurrency within the grasp of the average investor.
However, as retail investors look for ways to more easily obtain cryptocurrency, it opens the door for hackers and other cybercriminals to orchestrate massive cryptohacks. While blockchain, the way cryptocurrencies maintain a record of all transactions, is known as being secure, hackers have found ways of hacking into individual investor’s cryptocurrency wallets. Hackers can also target the decentralized finance (“defi”) platforms many buyers use to buy and sell their cryptocurrency.
For example, very recently, cryptocurrency exchange Crypto.com confirmed that a hacker stole $30 million in cryptocurrency from 483 users’ digital wallets. According to one recent report, hackers made off with 4,836 Ethereum (“ETH”), worth approximately $13 million, almost 444 Bitcoin (“BTC”), worth about $16 million, and roughly $66,200 in other currencies. In response, Crypto.com was able to recover some of the lost currency and reimbursed investors for their losses. However, companies may not always offer this type of remedial action, leaving investors on the hook for losses.
Another recent example of a cryptohack involves the theft of $320 million in digital assets, including 94,000 wrapped Ethereum tokens (“wETH”). In response, the decentralized finance platform Wormhole, from which the tokens were stolen, offered the hacker a $10 million bounty to return the assets and explain how they were able to exploit vulnerabilities in the system to carry out the attack. Again, the developer behind Wormhole offered to make things right with investors, reimbursing them for any losses. However, these efforts by decentralized finance platforms and their developers are likely an effort to appease consumers’ concerns about these hacks. Once defi catches on more broadly, the incentive to essentially insure all investors losses from cryptohacks may evaporate. Thus, it is essential for investors to know their rights and how to pursue them in the event of a cryptohack.
One of the problems leading to the increase in the hacking of cryptocurrency wallets and accounts is that defi is completely unregulated. This means that there is no uniform infrastructure, which opens the system up to all types of scams and hacks.
Cryptocurrency and decentralized finance are both relatively new concepts. However, existing consumer protection laws provide a way for investors who were bilked out of their cryptoassets to pursue legal claims against the responsible parties. That said, U.S. consumer protection laws have not been re-written with cryptocurrency in mind, so these lawsuits are usually handled by experienced attorneys who regularly handle data breaches and other similar claims requiring an advanced level of technical knowledge.
One of the issues facing victims of crypto theft is identifying the potentially responsible parties. Obviously, the party orchestrating the attack is one of these parties. Of course, due to issues with identifying and locating a hacker and their solvency (or ability to satisfy a judgment against them) make cases against hackers very difficult. However, hackers are not the only potentially liable party in the case of crypto theft; online trading apps, dapps (decentralized finance apps), developers and others may be on the hook for losses resulting from system vulnerabilities.
In theory, these parties all operate above-board and are registered with the state government where they operate. However, it can still be challenging to determine all the parties that have been negligent leading up to a crypto hack. Adding to these challenges is the fact that when a hacker carries out a cyberattack targeting cryptocurrency, it is generally very challenging for the hacked platform to determine what exactly happened. This can leave investors with many questions and few answers.
Cryptotheft is illegal, yet because of the new, decentralized and unregulated nature of this environment, it appears that the rate of cryptotheft will only continue to increase. The important takeaway is that there are legal remedies for the victims of cryptohacks. These remedies may allow for aggrieved investors to recover the value of stolen cryptoassets and obtain other damages related to their losses. An experienced cryptotheft lawyer can determine the most appropriate remedy for an individual investor and can advise them on how to pursue their claim.
If you’ve been affected by cyyptotheft, Console & Associates, P.C., will investigate your case at no charge and offer you thorough advice about how to most effectively proceed with your case. If you decide to bring a case, we only get paid if you do. If your claim is successful, any legal fees are either paid by the defendant or come out of the funds recovered from the defendant. If your claim doesn’t result in a recovery, you will pay nothing.