Crypto Theft: What To Do When Your Digital Assets Are Stolen – Legal Remedies And Real-World Action

The two most common types of cyber fraud are phishing and social engineering. Many investors fall for frauds that imitate trustworthy cryptocurrency platforms, leading them to browse fraudulent websites or click on malicious links. Avoidable mistakes are the root cause of many crypto catastrophes. Falling into scams and fraudulent websites, putting too much trust in strangers on social media, using weak passwords and 2FA, storing every penny in one place, believing anybody who claims excellent returns or some "secret" investing technique, and more are some of the biggest security pitfalls. Vikram Subburaj, CEO of Giottus Crypto Platform, talked about the rise in cryptocurrency thefts and what to do in any situation when one's digital assets are stolen in this article based on an interview.

Q1. What are the most common ways in which investors lose their digital assets today?

Answer: Phishing and social engineering are at the forefront of all cyber scams. Many investors are tricked into visiting fake websites or clicking malicious links that mimic legitimate crypto platforms. Once there, they unknowingly enter their credentials or seed phrases, handing thieves the keys. Another pervasive threat is the rise of "pig butchering" scams.

These are long-con schemes where fraudsters cultivate trust with victims (often via social media or dating apps) and then entice them into sham crypto investments with promises of high returns. These schemes exploded in 2024, with revenue from pig butchering scams jumping nearly 40% and helping push total crypto scam losses to an estimated $10-12 billion that year. False promises of guaranteed profits like, "send 1 BTC, get 2 BTC back," remain a classic ploy.

Impersonation scams are also rampant: criminals impersonate customer support or government officials to extort payments. Such scamsters prey on fear and trust (the number of transfers to such scam addresses surged in 2023 even as overall scam revenue fell). In summary, most digital assets are lost not from a blockchain hack, but from investors being deceived.

Q2. If someone's crypto is stolen, what's the first thing they should do - both technically and legally?

Answer: The immediate step is to act quickly and decisively. Technically, start by securing your environment. Disconnect the affected wallet (if it is a software wallet or dApp) and move any remaining funds to a new secure wallet (preferably one whose seed phrase was never exposed online).

If the theft occurred on an exchange account, change your passwords and enable 2-factor authentication (2FA). Also, immediately notify the exchange support team to freeze your account or any pending withdrawals. Time is critical. Also, document everything: transaction IDs, hacker's addresses, screenshots of phishing messages etc. This will be vital for investigators.

In parallel, take legal action. In India, victims should promptly file a complaint with the cybercrime police or through the National Cyber Crime Reporting Portal (cybercrime.gov.in). Filing an FIR (First Information Report) creates an official case. Provide all the evidence you gathered. The more details law enforcement has, the better the chance of tracking the funds. We have seen that quick reporting can make a difference. Many exchanges can flag or block funds from known illicit addresses.

Avoid negotiating with or paying the thief if they solicit a "refund" fee. Instead, let law enforcement handle the contact. Technically and legally, the mantra is the same: act quickly and involve the right platforms/authorities without delay.

Q3. Can Indian users file complaints or take legal action in such cases? What has your experience been with the current system?

Answer: Yes, Indian users can and should file complaints. Crypto may be a new domain, but it is not lawless. Our law enforcement agencies are increasingly familiar with these crimes and their patterns. In fact, the Government of India operates a centralised National Cyber Crime Reporting Portal, and its helpline number is 1930.

Victims can lodge complaints online and in 1930 and this feeds into state police cybercrime units. From there, an FIR can be registered to formally investigate the matter. In 2023, over 100,000 cybercrime complaints were filed across India. Official estimates say about ₹25,000 crore (almost $3 billion) was lost to crypto-related fraud in the past three years.

In our experience, the system is earnest but still evolving. We have had users approach us after being scammed, and we have assisted by guiding them on the reporting process. When appropriate, we have also shared intelligence with law enforcement. Police departments have dedicated cyber cells and many of these are now quite adept at the basics of blockchain tracing. We have collaborated with various state police, and what I see is a genuine intent to crack down on crypto fraud.

However, challenges remain. The legal framework around crypto is still evolving. Right now, cases get registered under general sections of the IPC (for cheating, breach of trust, etc.) or the IT Act. There is no specialised crypto law yet. This can sometimes lead to confusion or slower progress, especially if an officer is unfamiliar with how digital currencies work. Law enforcement is actively upskilling. For example, our company (Giottus) published a "Handbook for Investigations into Virtual Digital Assets." This was released by the Tamil Nadu DGP.

Q4. How does Giottus assist users impacted by theft or fraud? Any recent examples you can share?

Answer: At Giottus, we've made it part of our mission to not only provide a secure platform but also to support our users in the unfortunate event of fraud or theft. Our approach is both proactive and reactive. On the reactive side, if a user contacts for help, our team springs into action. We have a dedicated compliance and security team.

First, if the incident involves their Giottus account (say, an unauthorized login), we will freeze the account temporarily to prevent further misuse. We then work with the user to analyze the breach. For instance, we determine if their login credentials were phished or if their device was compromised by malware. If the theft happened off our platform (for example, the user was tricked into sending crypto to a scam address), we still try to help: our team can use blockchain tracing tools to follow the money trail of the stolen assets.

A recent case comes to mind where a user was deceived by a fake investment scheme. Our investigators traced the funds and discovered they went to an exchange overseas. We coordinated with that exchange and law enforcement, which eventually led to the funds being frozen there.

On the proactive side, education and prevention are where we really focus. Giottus has been a big proponent of user education on crypto safety. We regularly publish blogs, social media advisories, and even in-app notifications about emerging scams (phishing alerts, fake token airdrops, etc.). We have hosted webinars for our users on how to recognize scams and protect their wallets.

Internally, we have implemented security features like withdrawal address whitelisting and suspicious login alerts to catch issues early. We were also among the first Indian exchanges to partner with an insured custody provider. Through BitGo, we secure user assets in cold storage with insurance coverage. That means even in the unlikely event of a breach on our side, users have that extra layer of protection.

Q5. What are the biggest mistakes people make with crypto security - and how can they avoid them?

Answer: Many crypto mishaps boil down to avoidable mistakes. Some of the biggest security pitfalls we observe (and how to avoid them) include:

Falling for phishing scams and fake websites: A common mistake is clicking on links from unsolicited emails, WhatsApp forwards, or Twitter DMs that lead to lookalike sites. Users then enter their wallet seed phrase or login details on these fraudulent sites, essentially handing over control.

To avoid this, never trust random links. Always double-check the URL of the website (scam sites often use subtle typos like giottuss.com (an extra s is inserted) instead of the original giottus.com. And remember, no legitimate support staff will ever ask for your seed phrase or passwords via email or chat.

Over-trusting strangers on social media: Crypto scammers often "groom" their victims by building a friendship or romance online. This is a ploy to later pitch a fake investment scheme. It is a mistake to trust strangers who promise to make you rich. We have seen criminals operate on Telegram, WhatsApp, dating apps, you name it - some even spend months chatting and gaining trust before executing the fraud.

Poor password and 2FA hygiene: Another huge mistake is treating crypto accounts like any regular online account. People reuse weak passwords or neglect two-factor authentication. Using "password123" on your exchange account is as good as leaving your front door unlocked. Hackers often try leaked emails/passwords from other breaches to get into crypto accounts. Always use a strong, unique password for your crypto exchange or wallet account.

Keeping all funds in one basket (hot wallets): Convenience sometimes tempts people to hold their entire crypto portfolio in a single online wallet or exchange account. This is risky. If that one point of storage is compromised, all funds are gone. A smarter approach is to use cold storage for the bulk of your holdings - hardware wallets or secure offline wallets that aren't constantly connected to the internet.

Chasing "too-good-to-be-true" gains: Last but not least, a classic mistake is getting lured by irrational exuberance - believing anyone who promises guaranteed high returns or some "secret" investment strategy. Scammers frequently pitch schemes like "double your money in a week" or fake mining/staking programs with unrealistically high yields. Always remember: if it sounds too good to be true, it is.

Q6. With regulations evolving, do you see better protection or grievance mechanisms coming up for Indian crypto investors?

Answer: I do. In fact, we are in the middle of that evolution right now. India's regulatory stance on crypto has been maturing step by step. And, with each step, the foundations for better investor protection are being laid. Let's look at a few developments:

The government has already brought crypto exchanges under mainstream regulations like anti-money laundering laws. In March 2023, crypto service providers were officially brought under the Prevention of Money Laundering Act (PMLA). It means exchanges like Giottus now have legal obligations to conduct thorough KYC, monitor transactions, and report any suspicious activities to the Financial Intelligence Unit, just like banks do.

On the investor protection front, we anticipate clear laws or guidelines specifically for crypto investments soon. The signs are all around us. The Supreme Court of India recently urged the central government to expedite comprehensive crypto regulations, explicitly highlighting the need for legal clarity and consumer safeguards. The government appears to be moving in that direction: there's talk of an upcoming crypto policy consultation paper to kickstart a structured regulatory approach.

If we project based on these signals, I see a future where India implements something like: defined categories for crypto assets (so laws know what's a commodity, what's a security token, etc.); a licensing regime for exchanges (ensuring only credible, well-capitalized players handle public money); and mandated grievance redressal mechanisms.
From the industry side, reputable Indian crypto companies have already formed self-regulatory alliances and adhere to codes of conduct on security, advertising standards (for example, not promoting misleading ROI claims), etc.