25 May, 2023

How Evertas Recovers Stolen Crypto

Category: Education

As a crypto insurance company, Evertas is all about helping our crypto custodian clients prevent covered events — primarily the theft of digital assets. But the reason we exist is because while the risk of hacks can be made extremely small, if a custodian is to offer any practical service at all, it can never be zero. Also for that reason, we include digital asset recovery in our suite of professional services.

Recovering stolen crypto is always a challenge but succeeds at least partially more often than one might expect. One reason it’s possible is because the thief rarely expects to gain access to much of what they take. It’s just too difficult for them to safely convert large amounts of stolen crypto to actual dollars. So, the attackers who took $600 million in WETH from the Ronin Network in 2022, knew that some of it would be seized before they could get it laundered and converted to cash. And indeed, some of it was.

Unique Challenges of Digital Asset Recovery

As when recovering traditional assets, the process of reclaiming stolen crypto involves identifying, tracking, tracing and locating digital assets in order to make a seizure. Unlike traditional assets, crypto brings with it significant variation in fungibility and technical requirements, requiring special approaches and industry-specific knowledge.

The ability to reconstitute wallets via seed phrase means that even after identifying stolen digital assets, there remains a very real risk of losing them again. Therefore, the perpetrator’s chain of custody needs to be immediately broken. Once seized, assets remain a tempting target and so must be held securely, free of mismanagement and theft, in a way that doesn’t directly degrade their value.

Finally, recovered digital assets must be converted into a form that facilitates return to the victims or use as a means of satisfying applicable financial obligations. The large number of entities involved in this process, including exchanges, custodians, mixers, auction houses and infrastructure providers, adds friction. Evertas simplifies the process by providing clients with a single point of contact.

The Process of Digital Asset Recovery

Evertas begins the recovery process with a client intake session. The information collected through that process allows lost assets be to classified as either recoverable, possibly recoverable or non-recoverable. If classified as recoverable or possibly recoverable, the next step is to begin seizure planning, which includes acting on the client’s behalf to notify law enforcement as required by jurisdiction.

Many factors determine the ultimate recoverability of funds lost to hacks or fraud. Fast action upon discovery of the theft allows us to deploy market-leading applications and platforms to track wallets, trace funds flows and hopefully identify those responsible.

Once funds are recovered—either through civil or criminal litigation action—there are additional risks associated with the storage, management, and subsequent disposition of recovered assets. Evertas offers a variety of secure asset storage solutions to meet client requirements and keep recovered assets secure while arrangements are made for their sale or transfer.

We often list digital asset recovery alongside our various policy types, though it is not in fact a form of coverage. Instead, it’s a supplemental service, which insureds may opt to pay for in advance as part of their premium. Then, in the event of a covered event, the service is immediately activated.

Additionally, we offer digital asset recovery and other professional services to Web3 projects that are not insured by Evertas. To learn more, please contact us.

Tags: crypto insurance | crypto recovery | professional services | security | web3