Cryptocurrency theft is a growing problem as more people invest in digital assets like Bitcoin and Ethereum. Platforms like Coinbase have security measures in place, but breaches can still happen. The big question for victims is: can you recover stolen funds from a crypto exchange like Coinbase?
The short answer
In most cases, it is very difficult or impossible to get your money back if it is stolen from your Coinbase account. However, there are some steps you can take to try and recover stolen funds:
- Contact Coinbase support immediately
- File a report with law enforcement
- Hire a lawyer or cybersecurity firm
Unfortunately, there are no guarantees you will get your cryptocurrency back. Crypto transactions are designed to be irreversible, so exchanges like Coinbase have little power to reverse payments. But contacting support and authorities quickly gives you the best chance.
How money gets stolen from Coinbase
Before looking at how to get your money back, it helps to understand how thieves can steal crypto from your Coinbase account in the first place. Here are some of the most common ways:
Phishing/identity theft
Phishing is when attackers try to trick you into handing over your account login details or other personal information. They may send emails that look like they’re from Coinbase asking you to sign in. If you enter your info, the attackers can access your account.
SIM swapping
A SIM swap attack is where scammers convince your cell provider to transfer your number over to a SIM card they control. This lets them bypass 2FA protections on your Coinbase account if you use text message authentication.
Malware/keyloggers
Malware implanted on your device can record your keystrokes and capture your Coinbase password when you log in. Keyloggers are a type of malware specialized for stealing credentials.
Weak passwords
If you use weak passwords that are easy to guess, thieves can crack them and log in to your account. Always use strong, unique passwords for important accounts.
API exploits
APIs allow third-party apps to interact with your Coinbase account. If these apps have security flaws, attackers may be able to exploit them to drain your account.
Steps to recover stolen crypto from Coinbase
If you’ve fallen victim to theft, here are some steps to take:
1. Contact Coinbase support
The first thing you should do is reach out to Coinbase customer support. You can submit a request here:
Explain the situation in detail, providing any evidence you have about the unauthorized transactions. Coinbase may be able to freeze your account, prevent further withdrawals, or trace the destination of stolen funds.
2. File a report with law enforcement
You should also file a report with police about the theft. Provide them with details like:
- When you noticed the theft
- How much was stolen
- How you store your account credentials
- Whether your device was compromised by malware
Law enforcement may be able to identify the perpetrator based on how the attack took place and alert exchanges to look out for the stolen funds.
3. Explore legal options
An attorney that specializes in cryptocurrency fraud may be able to advise you on legal strategies to recover stolen funds or pursue damages. A letter from a lawyer may also convince Coinbase to take further action.
4. Hire a blockchain investigator
There are cybersecurity firms like Chainalysis that specialize in tracing stolen cryptocurrency transfers on the blockchain. Their sophisticated tracking tools can sometimes identify the thief’s wallet address or exchange account.
This information can then be provided to law enforcement or Coinbase to assist recovery efforts. However, these services can be expensive.
Will insurance cover stolen crypto?
Personal insurance policies like homeowners or renters insurance typically do not cover cryptocurrency theft. However, Coinbase does have an insurance policy for its “hot wallet” holdings through Lloyd’s of London.
According to Coinbase, this insurance policy has about $250,000 in coverage per customer in cases of theft by hacking. So if your stolen funds were stored in Coinbase’s online hot wallet, you may be able to make a claim.
But the coverage does not apply if your personal account credentials were compromised.
How to prevent crypto theft
While recovering stolen funds is tough, there are things you can do to avoid theft in the first place:
- Use strong, unique passwords for every account
- Enable 2FA/MFA using an authenticator app, not just SMS
- Be vigilant about phishing attempts and don’t click suspicious links
- Only use trusted apps that integrate with your Coinbase account
- Use offline cold storage like a hardware wallet for large holdings
- Keep devices up-to-date and running anti-virus software
Practicing good crypto security makes you a much less likely target.
The risks of storing crypto on exchanges
Storing cryptocurrency on an exchange like Coinbase does come with risks, including:
- Exchange hacks – Coinbase stores most crypto in offline cold storage but hot wallet breaches can occur
- Insider theft – Rogue employees could steal funds
- Lack of insurance – Most holdings aren’t covered under Coinbase’s insurance
- Personal account compromises – Individual accounts can still be breached
For these reasons, many experts recommend against keeping significant crypto funds on an exchange long term. Offline cold storage options like hardware wallets provide greater security.
Coinbase security features
Coinbase does have some robust security protections in place:
- 98% of crypto held offline in cold storage
- FDIC insurance for USD cash balances up to $250,000
- 2FA/MFA options for account access
- AES-256 encryption and SSL/TLS protocols
- Device confirmation for withdrawals
- ID verification required for accounts
However, as the saying goes: “not your keys, not your coins”. Storing crypto on any centralized platform still requires a base level of trust.
Should you keep cryptocurrency on Coinbase?
Here are some general guidelines for deciding whether to store crypto on Coinbase versus in an offline wallet you control:
| Coinbase | Offline Wallet |
|---|---|
|
|
In summary, Coinbase is reasonable for smaller crypto amounts you plan to actively use or trade. But large investments should be held in an offline wallet that you control.
Conclusion
Unfortunately, recovering stolen cryptocurrency is very difficult under most circumstances. If your Coinbase account is compromised, acting quickly can give you the best chance of freezing the account or tracking the stolen funds. But there are no guarantees.
Preventing theft through strong security practices is essential. Enable all recommended security features on Coinbase and never keep more crypto on exchanges than you can afford to lose. For significant holdings, use offline cold storage wallets where you control the private keys.
Storing crypto on platforms like Coinbase does entail risk. While Coinbase has strong protections in place, breaches can still happen. Weigh the risks and benefits when deciding where to keep your cryptocurrency.
