How Crypto Users Get Hacked — and Exactly What to Do About It

Posted by AEM Algorithm

A practical, non-judgmental guide for beginners and advanced users.

This guide covers common MetaMask attack vectors, why multisig Safes help, a full post-hack workflow (technical triage → reporting → law enforcement → AML/exchange escalation), plus monitoring, prevention, and useful tools.

1. Common MetaMask & Wallet Failure Modes (What Actually Goes Wrong)

Most losses happen because a secret was leaked or a malicious actor gained on-chain approval.

Main causes

• Phishing & Fake UI:

  • Fake websites imitating dApps, exchanges, or MetaMask prompts trick users into signing malicious messages or revealing seed phrases.

  • Popup overlays replicate wallet UIs and ask for “recovery” or “re-login.”

• Malicious or Compromised RPC / VPN / Proxy Nodes:

  • Third-party VPNs or proxy configs can route traffic through malicious exits that inject or alter pages.

  • Tampered config files can let attackers redirect or intercept your connection.

• Malicious Browser Extensions & Injected Scripts:

  • Compromised or overly-permissive extensions can modify transaction details before you sign.

• Malicious Token Approvals (“Infinite Allowance” Trick):

  • Granting unlimited token approvals allows contracts to drain holdings later.

  • Often occurs via airdrops, “claim,” or swap UIs.

• Seed Phrase / Private Key Exposure:

  • Seeds stored in cloud backups, notes, or screenshots are easily stolen.

  • Keyloggers or clipboard malware can capture seeds and wallet addresses.

• Social Engineering / Account Takeover:

  • Attackers trick users or compromise linked email/password manager accounts.

2. How a Malicious VPN or Bad Proxy Configuration Makes Things Worse

VPNs can provide a false sense of safety.

• Untrusted exit nodes can see unencrypted traffic and inject fake pages.

• Many community proxy clients accept remote config URLs—if compromised, they redirect traffic through attacker infrastructure.

• Unofficial or pirated installers may contain spyware or keyloggers.

Best practice:Use reputable, audited VPNs (commercial providers) and avoid community subscription files you don’t control.

3. Why Multisig Safes (e.g., Gnosis Safe) Matter — Benefits and Caveats

Multisig isn’t magic—it just raises the cost for attackers and gives you time to react.

Benefits

• No single point of failure: one compromised key can’t move funds alone.

• Operational control: require multiple, geographically separate signers or hardware wallets.

• Audit trail: every transaction is on-chain and verifiable.

Caveats

• Poor threshold design (e.g., 1-of-2 or 2-of-2) can cause lockout or risk.

• If attackers gain majority keys, they can still move funds.

• Social engineering of co-signers remains a risk.

Best practice: use hardware signers, diversify devices/locations, and prefer 2-of-3 multisig for balance between redundancy and security.

4. Full Process After You Suspect a Hack — Step-by-Step

Act fast and be methodical.

A. Immediate Containment (First 0–60 Minutes)

• Stop using the compromised wallet.

• Disconnect from the internet or power down.

• For multisig, don’t co-sign anything until verified safe.

• Take screenshots of balances and transactions.

B. Evidence Collection (Same Day)

• On a clean device, gather wallet URLs and transaction hashes from Etherscan/Polygonscan.

• Record timestamps, tokens, and receiving addresses.

• Save CSV exports and screenshots.

C. Technical Forensics (Within 24–48 Hours)

• Scan devices using Malwarebytes, Bitdefender, or Intego.

• Reinstall OS if malware is found.

• Revoke token approvals using Revoke.cash from a clean wallet.

• Create new wallets—prefer hardware devices.

D. Reporting & Escalation (Same Day → Next Few Days)

• Contact exchanges that received stolen funds (include TX links, wallet addresses, police report ID).

• Report to AMLBot, TRM, or Chainalysis via their “report address” portals.

• File a police report (e.g., ReportCyber in Australia).

• Keep reference numbers and all correspondence.

E. Legal / Recovery Paths

• Some exchanges may freeze funds if deposits remain linked to verified IDs.

• Attach all evidence and case IDs to law-enforcement and exchange reports.

5. What to Include When Contacting an Exchange or AML Vendor

Provide these details clearly:

• Victim wallet address.

• Transaction hashes (full URLs).

• Attacker/deposit addresses.

• Amounts, tokens, UTC timestamps.

• Police report ID and agency contact.

• Screenshots of before/after balances.

• Statement: “Unauthorized transfer. I did not approve these withdrawals.”

6. Recommended Tools & Antivirus Software

• Malwarebytes: Fast scans for common malware.

• Bitdefender: Deep scanning for macOS/Windows.

• Intego: macOS-focused protection.

• ESET / Windows Defender Offline: Rootkit detection.

If infections persist, reinstall your OS from a clean image or bootable USB.

7. Revoking Approvals & Cleaning On-Chain Exposure

• Use revoke.cash or Etherscan’s Token Approval tool.

• Remove unlimited allowances from untrusted contracts.

• Avoid “Approve unlimited” by default—choose exact spend limits.

8. Monitoring & Alerting Setup

• Enable alerts on Etherscan, Zapper, or Blocknative.

• Use AML monitors (AMLBOT, TRM, CipherTrace).

• Set up custom email/SMS alerts for outgoing transfers or unusual approvals.

9. Wallet Hygiene & Preventive Best Practices

• Never store seed phrases in cloud services or screenshots.

• Use hardware wallets for large holdings.

• Maintain multisig Safes for team or treasury funds (2-of-3 preferred).

• Limit and review token approvals regularly.

• Bookmark official dApps and avoid DM links.

• Keep OS and browser updated; isolate crypto activity in a separate browser profile.

• Avoid public or untrusted VPN configurations.

10. Advanced Mitigations (For Power Users)

• Use account abstraction or wallet-factory patterns to separate hot and signing keys.

• Implement timelock modules for large transfers.

• Air-gapped cold storage for high-value transactions.

• On-chain alert bots for auto-freeze or co-signer notifications.

11. How to Write a Police Report or Exchange Ticket

Example statement:

“My wallet [address] was compromised on [date/time UTC], and unauthorized transfers occurred to [attacker addresses]. I’ve attached transaction links, screenshots, and antivirus scans. Police case ID will be provided.”

Attach your evidence, police report, and request immediate preservation/freeze.

12. Final Reality Check & Mindset

Successful recoveries depend on speed, evidence, and cooperation.The earlier you act and the more complete your documentation, the higher the chance of recovery.

Prevention beats recovery:Hardware wallets + multisig + minimal approvals + cautious online behavior will stop most hacks.

Quick Checklist — What to Do Right Now

✅ Don’t reuse the compromised wallet.

✅ Gather TX URLs, screenshots, and timestamps on a clean device.

✅ File a police report and get a case ID.

✅ Send evidence and case ID to exchanges and AML providers.

✅ Scan and, if necessary, reinstall OS on compromised devices.

✅ Create new hardware wallets and migrate funds.

✅ Revoke old token approvals safely.