How to interact with the exchanges in case of fraud

The growth of the cryptocurrency market along with the increased activity of shady players led to the emergence of various schemes and fake services targeting to trick investors for gaining cryptocurrency.

With any kind of cryptocurrency fraud whether it is a scam project or a rag pool the fraudsters are trying to withdraw stolen funds in fiat currency right after receiving cryptocurrency to their wallets.

Analytical tools of the TokenScope platform, in turn, allow to trace and to construct graphically the ways of funds withdrawal from the wallet of the user to the address of the fraudster, and to reveal further the entire chain of the cryptocurrency transfers.

Such kind of researches can be used in the investigation of the cryptocurrency frauds and can be presented as an evidence to the law enforcement authorities, as well as used in the civil disputes in pre-trial and court proceedings. The practice of investigations shows that there are two main types of funds movement:

• The transfer of the funds to a cold storage wallet. In this case, the best solution is to monitor the wallet activity in order to determine the next address to which the funds would be transferred for further withdrawal or to monitor the information about the address in the cryptocurrency community about its affiliation or connection with some project or individual.

• The funds are withdrawn to the address located on the exchange service, mixer, or cryptocurrency exchange, where they can be converted to another currency and transferred to another blockchain, or withdrawn to fiat currency.

The case when the cryptocurrency funds are directed to a large and well-known exchanger or exchange seems to us more positive regarding the refunding chances. Large and popular services value its reputation and trying to assist both private persons and law enforcement agencies in blocking such addresses.

Less popular services may not respond to the requests and may not cooperate with the law enforcement agencies. In case they receive complaints about the specific address from several sources, in practice, the service can at least block such address or addresses.

Cryptocurrency services are located in different jurisdictions and their activities are subject to different rules and procedures, but the general rule in is to send a complaint to the service, describing the circumstances of the theft of funds, indicating the time and amount of funds sent to the exchange wallet. Most often, the exchange has a special form for such appeals, otherwise it’s possible to submit a request by an e-mail.

TokenScope Team has developed standard forms of appeals to the exchanges for such cases and soon they will be available on our website. In most cases, after the exchange receives such an appeal or a special research, blocks the possibility of the funds withdrawal from the wallets of the scammers. However, the personal data of the owner of the wallet and further movement of funds, more often than not, are disclosed upon request from the law enforcement agencies.

According to the recent practice, the most effective way to recover stolen funds is to conduct a preliminary investigation, for example, using the analytical tools of the TokenScope platform, then submit it both to the exchange and to the law enforcement agencies.

Successful investments in cryptocurrency projects and don't forget to check addresses for risks, it can help to save your funds! Also, you can report us any cases related to specific cryptocurrency addresses and the considered risks at TokenScope via "Reporting a cryptocurrency address" form. This will help to protect other users from the risks of interacting with such addresses and their owners.