It seems there is some sort of breaking news every other month about one crypto exchange or the other being hacked. Unfortunately, this seems to have become a fairly common occurrence and has affected large exchanges such as Cryptopia and also small exchanges such as Maplechange. Despite all the security measures that are taken throughout the industry, it seems that hacks of crypto exchanges cannot be entirely avoided as of now and they usually lead to the loss of up to millions of dollars in customer and corporate funds.
Because of their prevalence, many crypto users are always on the lookout for signs of hacks and while no one actively hopes that the exchange they use will be hacked, it is important to know what steps to take in the event of that happening. In the event of an exchange hack, you make use of being compromised, your ability to mitigate whatever damage mostly relies mostly on your ability to act fast and also your having the right information and support.
The First 24 Hours
This is arguably the most important period of time after an exchange hack takes place because this is when the most initial salvaging can take place on the part of the exchange user. You can’t control how fast the exchange itself responds to the hack but you can take steps to make sure that you suffer as little damage as possible.
The first step to take is to confirm that the exchange has actually been hacked as rumors often float around of one exchange of the other being hacked and not all are true. First, visit the official social media accounts of the exchange in question to see if there’s been any official announcement. If there has, you can take the information as fact and if not, visit some popular crypto-focused support groups such as subreddits and discussion forums. More often than not, other users would likely be wondering about the same thing and they might be some information being passed around.
After you get confirmation of an exchange hack, it would be in your best interest to immediately log into your account and change your passwords and other security information. Though exchanges are often locked to users following hacks, it doesn’t hurt to try.
Often times, when an exchange is trying to recover from a hack, they advise users to change their security details but it is best to get a head start. Most crypto users are advised to never to hold their funds exclusively in an exchange and instead make use of a cold or hot wallet. If you do have funds in an exchange you think might be hacked, move them immediately. Whether you have been able to move your funds or have not been able to login to your account at all, your next step is to wait for information to come from the exchange itself.
The Days After
After an exchange hack has been confirmed there will likely be a lot of reports floating around on crypto-focused news sites that will try to release some details about how the attack took place and how much damage has been done. Be somewhat skeptical about a lot of reports as some are sensationalized and instead, read-only reputable reports from respected new sites. Usually, after an exchange has confirmed that they will give some update about how they intend to proceed.
Most times, a police investigation will be opened into the hack and how it took place and this could take a few weeks to a few months to complete. While you wait for official word to be given, keep your ear to the ground stay subscribed to news regarding crypto or set up Google alerts for the name of the exchange so that you will know immediately when an update is given.
If no update is given by the exchange at all after the hack, it is possible that the exchange users have been victims of an exit scam in this case, it would be best to contact former users of the exchange as most times, victims take collective action against the exchange or at least keep each other in the loop. In the case of Cryptopia, the exchange was opened in read-only mode before finally being re-opened. If the exchange in question will be reopened at all, the management will likely inform users ahead of time of the opening date. Take note of this and log back into your account as soon as possible.
Months or Years After
In most cases, crypto exchange hacks are resolved within a few months and users either get their funds back or not. However, there are a few extreme cases such as the Mt.Gox case in which the resolution of the hack took years, with the exchange filing for bankruptcy and closing down altogether.
Unfortunately, if an exchange files for bankruptcy or proves to the courts that they are insolvent as a result of the hack, it would be unlikely that you would get any lost funds back. While that is going on, victims of an exchange hack usually take collective action such as a class-action lawsuit against the exchange demanding compensation.
This is another reason why it is important to stay in the loop and continue to receive information regarding the exchange from other victims. Bear in mind that if an exchange has to file for bankruptcy and take the matter to court there is very little chance of funds being recovered by the users but nevertheless, it is important to explore your options in such a case. There was the case of Bitfinex, in which a small amount of the funds that were stolen were recovered from the hackers and disbursed to some of the victims.
Stay in the Loop
While no exchange user hopes that a hack will occur, they nevertheless do. All the above steps should be kept in mind and acted on very quickly should you find yourself in this situation as it could mean the difference between recovering some of your funds and completely losing out in the end.
Hopefully, as security improves over time, we might be looking towards a future in which exchange hacks are a thing of the past rather than a fairly common occurrence.