Crypto Drainers: How Cryptocurrency is Stolen and Whether Funds Can Be Recovered?

In recent years, the number of fraudulent schemes in the crypto asset market has been rapidly increasing. One of the most common is crypto drainers. These are tools that allow criminals to siphon assets from victims' wallets. Lawyer and attorney from <>, Marko Holovach, explains how crypto drainers work and how to protect your money.

Typical Fraud Scenarios

The most common example of drainer implementation is airdrop or NFT campaigns, where users are offered to receive assets with just a few clicks. To do this, they only need to connect their wallet and confirm a transaction that actually opens access to funds or immediately triggers the mechanism for their withdrawal.

A similar logic applies to the use of fake websites of well-known services. Visually, such resources can completely replicate the original, with differences limited to minor details in the domain or interface. As a result, the user fails to identify the threat and interacts with the resource as if it were legitimate.

Additionally, criminals actively exploit the trust factor in the source of information. This involves compromising accounts on social media or project communities where malicious links are spread. Since such messages appear to come from a well-known project, the risk of them being perceived as safe significantly increases.

It is also worth noting the so-called approve schemes. In this case, the user does not lose funds immediately but signs a transaction that grants the smart contract the right to manage assets in the future. In practice, such mechanisms are often used on fake exchanges or pseudo-DeFi services: after signing the approve, criminals simply wait for assets to arrive in the wallet or for the balance to increase, after which they carry out automatic withdrawals without any additional confirmation from the user. This is why the victim may not suspect for some time that access to their assets has already been effectively transferred to third parties.

In more complex scenarios, fake DeFi platforms or investment services are used, which imitate real interactions with blockchain protocols. However, the end result remains the same --- the user voluntarily grants access to their assets, after which they are withdrawn to addresses controlled by criminals.

Schematic Representation of the Movement of Stolen Funds

Can Stolen Funds Be Traced?

One of the key myths that plays into the hands of fraudsters is the notion of complete anonymity of cryptocurrency. In reality, most public blockchains, including Ethereum, operate on the principle of full transparency: every transaction, address, and movement of assets is stored in an open ledger. This means that after theft, funds do not disappear but continue to move, which can be traced.

This is the basis for analyzing blockchain data to establish connections between addresses and track the flow of assets. In practice, two basic approaches are used.

Firstly, clustering of addresses. This involves grouping different crypto addresses into conditional clusters that are highly likely to be controlled by one person or service. This is done based on behavioral patterns: shared use of funds, nature of transactions, interaction with specific smart contracts, etc. As a result, instead of a set of disparate addresses, a more coherent picture is formed.

Secondly, tracking the flow of funds. After an incident, a chain of transactions is built: where exactly the assets were transferred, how they were split, whether they passed through other services. Such analysis allows identifying key points, including places where funds enter centralized infrastructure.

For this, specialized tools such as Chainalysis and TRM Labs are used. They combine technical blockchain analysis with their own databases (for example, addresses of exchanges, services, previously identified schemes), allowing not only to see the movement of funds but also to understand who or what the address is interacting with.

An important element is the so-called marking of funds as stolen. How this works in practice. After the incident is recorded and a preliminary analysis is conducted, addresses that received the stolen assets or were used in the scheme are identified. These addresses are passed on to analytical platforms or directly to centralized services (for example, cryptocurrency exchanges). In their compliance systems, such addresses receive a risk status.

Subsequently, if funds from these addresses or related clusters enter a platform with KYC procedures, this may automatically trigger:

• additional transaction verification;
• operational restrictions;
• in certain cases, even temporary asset blocking.

In simple terms, the assets become marked: they are harder to use without interaction with compliance services, and any attempt to legalize them increases the risk of user identification.

For the victim, this has quite practical implications. Depending on the circumstances, the outcome of such work may include:

• establishing the route of the funds;
• identifying the services through which they passed;
• detecting the moment the funds entered a centralized environment;
• the ability to initiate asset blocking on the side of such services;
• forming an evidentiary base for further legal actions;
• in some cases, obtaining data that allows for the identification of individuals.

Thus, although crypto drainers create the illusion of untraceability, the public nature of the blockchain allows the movement of funds to be transformed into a traceable process. The subsequent outcome depends on how effectively this technical analysis is supported by legal tools.

Despite the fact that the movement of funds in public blockchains is subject to analysis, in practice, establishing the ultimate beneficiary of the scheme remains a complex task. This is due to the fact that malicious actors deliberately use tools and approaches that complicate or sever the tracking chain.

One such tool is mixers. Their essence lies in mixing funds from a large number of users: assets enter a common pool and are then withdrawn to other addresses in a changed structure. As a result, the direct link between the initial and final transaction is significantly complicated or becomes statistical rather than deterministic. For analytics, this means losing the clean chain of fund movement and the need to work with probabilistic models.

A similar effect is achieved through the use of cross-chain bridges. In this case, assets are transferred from one blockchain to another (for example, from Ethereum to another network), often with a simultaneous change in their form (wrapped tokens, etc.). Such a transition creates an additional break point for tracking, as further analysis requires synchronizing data from different networks and taking into account the specifics of each.

It is also worth noting the use of so-called private (anonymous) cryptocurrencies, where the very architecture of the blockchain is designed to prevent or significantly limit the tracking of transactions. The most well-known example is Monero.

Unlike public networks, in the case of Monero, technologies are applied that hide both the sender and the receiver, as well as the transaction amount (in particular, ring signatures, stealth addresses, and confidential transactions). In practical terms, this means that classic blockchain analysis, based on data openness, either does not work at all here or has significant limitations. If stolen funds are converted into such assets, further tracking becomes significantly more complicated.

Another factor is the use of centralized exchanges, which has a dual effect. On the one hand, the entry of funds onto a platform with KYC procedures creates the possibility of user identification. On the other hand, malicious actors often use multiple exchanges in succession, in different jurisdictions, or withdraw funds through services with less stringent verification requirements. This allows them to blur the trail and complicates operational response.

This is directly related to jurisdictional complexities. Crypto transactions are inherently not tied to a specific state, while access to information about users of exchanges or services depends on national legislation. As a result, obtaining the necessary data may require:

• international legal assistance;
• interaction with foreign regulators;
• compliance with procedures that take considerable time.

Finally, a common practice is the use of proxies (money mules, drops). In such cases, accounts on exchanges or other services are registered in the names of third parties who are knowingly or unknowingly involved in the scheme. This creates an additional level of separation between the direct executor and the organizer, complicating the proof of their roles.

Thus, while the technical ability to trace funds exists in most cases, in practice it faces a number of instrumental and legal barriers. These factors determine the complexity of a particular case and the extent of actions required to identify the involved parties and subsequently protect the interests of the victim.

Schematic Representation of Blockchain Tracking

Legal Protection Mechanisms

Despite the technological complexity of such schemes, crypto drainers are gradually ceasing to be a gray area for law enforcement and the judicial system. Ukrainian practice already includes both criminal proceedings against the organizers of such schemes and court decisions regarding the seizure of crypto assets, indicating a gradual formation of procedural mechanisms to protect victims.

The primary tool in most cases remains criminal proceedings. Depending on the circumstances, actions may be qualified, in particular, as fraud, unauthorized interference with the operation of information systems, or other crimes in the field of using electronic computing technology.

A notable case in this context is the verdict from February 26, 2026, in which the court examined a scheme involving a drainer. According to the case facts, the victim was persuaded via the Telegram messenger to transfer assets to a wallet and connect it to a fictitious cryptocurrency transparency verification service. After this, the perpetrators gained access to the digital assets and executed their withdrawal. The important fact is that the mechanics of the drainer are already directly mentioned in the criminal proceedings and receive legal assessment from the court.

The issue of recognizing crypto assets as property becomes particularly significant. This allows for the application of classical procedural mechanisms --- asset seizure, ensuring the preservation of assets, and further resolution of their return or special confiscation. Recent judicial practice demonstrates that Ukrainian courts are increasingly agreeing to the possibility of imposing a seizure specifically on virtual assets.

In practice, one of the most effective mechanisms is to approach centralized exchanges with a request to freeze assets. If blockchain analysis establishes that the stolen funds have reached a platform with KYC procedures, the victimized party or law enforcement can initiate restrictions on transactions with such assets.

And although exchanges do not always respond equally promptly, practice shows that with proper documentation of the incident and the presence of procedural documents, interaction is quite possible. Especially when it comes to large centralized platforms.

In parallel, judicial enforcement tools are also being used. In particular, from 2024 to 2026, Ukrainian courts repeatedly issued rulings to impose seizures on crypto assets serviced through accounts on the Binance exchange. In some cases, courts explicitly prohibited the use and disposal of virtual assets, as well as blocked the functionality of the respective accounts.

The discussion revolves around adapting the classic mechanism of asset seizure to digital assets. This is particularly important given the speed at which cryptocurrency can be moved: without prompt securing of assets, they can be transferred through multiple jurisdictions or converted into anonymous cryptocurrencies like Monero, where further tracking becomes significantly more difficult.

Another important procedural mechanism is the request for information. Within the framework of criminal proceedings or international cooperation, the following can be obtained:

• KYC data of users;
• login history and IP addresses;
• information about asset movements;
• related accounts and transactions.

These data often become critical for transitioning from an anonymous address to a specific individual. Since a significant portion of the crypto infrastructure is located outside Ukraine, international legal assistance plays a separate role. In practice, cooperation may involve:

• foreign cryptocurrency exchanges;
• domain registrars;
• hosting providers;
• law enforcement agencies of other countries.

Without this stage, effective investigation of cross-border schemes is often impossible.

Thus, despite the specifics of crypto assets and the technical complexity of drainers, modern legal mechanisms already allow not only for documenting the fact of theft but also for taking real procedural actions regarding the search, blocking, and potential return of assets. Judicial practice in this area is still forming, but it already demonstrates a gradual adaptation of classic legal tools to digital assets.

Algorithm of Actions for Victims

In the case of crypto drainers, the speed of response is critical. Due to the nature of blockchain transactions, assets can be moved between dozens of addresses within minutes, so the first actions after an incident directly affect the chances of further tracking and potential blocking of funds.

First and foremost, it is necessary to document all transactions and related data. This includes not only wallet addresses and transaction TXIDs but also:

• screenshots of the connected resource;
• links to the website;
• correspondence;
• messages in Telegram, Discord, or X;
• information about the time and sequence of actions.

In practice, even small details can be significant for further analysis and forming a body of evidence.

At the same time, it is advisable to seek legal assistance as soon as possible. In such cases, not only the technical tracking of funds is important, but also the correct procedural documentation of the incident from the very first stages. Timely involvement of lawyers allows:

• to quickly organize blockchain analysis;
• to prepare and document the evidence base;
• to properly initiate criminal proceedings;
• to prepare requests to cryptocurrency exchanges and other services;
• to minimize time loss, which in such cases is often critical.

The next step is to conduct blockchain analysis. Its goal is to establish the route of asset movement, identify related addresses, and check whether the funds have reached centralized services. This stage allows understanding whether there are practical possibilities for further asset seizure or user identification.

At the same time, it is important not to interact again with the scam resource. In practice, victims often try to cancel the transaction, reconnect their wallet, or perform additional actions that supposedly help recover funds. As a result, this can lead to further compromise or loss of other assets.

It is also advisable to:

• revoke permissions;
• disconnect the wallet from suspicious services;
• transfer the remaining assets to a new wallet.

Only after this, with the involvement of lawyers, does the initiation of criminal proceedings and further interaction with law enforcement agencies take place. Despite the complexity and cross-border nature of such schemes, it is precisely the criminal proceedings that create procedural mechanisms for:

• requesting information;
• international legal assistance;
• imposing seizures on assets;
• official communication with cryptocurrency exchanges and other platforms.

In the complex, this forms the basis for further protection of the victim's interests and potential asset recovery.

Is it Possible to Recover Funds?

There is no universal answer to the question of recovering crypto assets. The practical prospects depend on how the perpetrators acted after the funds were stolen, whether there are still points for further identification of the assets, and how quickly the victim began to respond.

The most favorable situations are when the stolen funds reach centralized exchanges (CEX). In such cases, there is an opportunity to establish the platform through which the assets passed, initiate a freeze on the funds, and obtain user data through KYC procedures. This is why the speed of response is critical: the sooner blockchain analysis is conducted and relevant requests are sent, the higher the chances that the funds have not yet been withdrawn or converted into other assets.

The prospects for asset recovery also significantly increase in cases where it is possible to identify a specific individual or establish a connection between addresses and real accounts. In this case, it is not only about technical tracking but also about the possibility of applying full legal mechanisms: asset seizure, information requests, criminal prosecution, and subsequent asset recovery.

At the same time, there are scenarios where recovering funds becomes significantly more complicated. This primarily concerns cases where assets pass through mixers, DeFi protocols, or cross-chain services, as well as being converted into anonymous cryptocurrencies, particularly Monero. In such situations, the transaction chain partially or completely loses transparency, and the possibilities of classical blockchain analysis are significantly limited.

Additionally, the situation is complicated by the use of a large number of intermediary addresses, shell accounts, and services in jurisdictions with minimal cooperation with foreign law enforcement agencies.

It is also worth noting that modern drainers are increasingly less limited to just a fake website or a single phishing attack. In fact, a whole hybrid ecosystem is forming that combines classic cybercrime, malware infrastructure, and blockchain mechanisms. This is noted by cybersecurity researchers, including SOC Prime.

In practice, this means that after the initial theft of funds, perpetrators may use:

• malware;
• compromised browser extensions;
• remote access to the device;
• automated drainer-as-a-service platforms;
• phishing resource networks and Telegram infrastructure.

As a result, the victim sometimes faces not only a one-time withdrawal of assets but also prolonged compromise of their own environment. This is why, after an incident, it is not enough to simply close the website or create a new wallet; in certain cases, it is necessary to check the device itself for malware or browser compromise.

Moreover, modern drainers are increasingly working on a drainer-as-a-service model, effectively functioning as a ready-made criminal infrastructure: some individuals administer the technical part, others engage in phishing campaigns and victim hunting, and the profits are distributed among the participants of the scheme.

This also affects the prospects for asset recovery. On one hand, a larger number of participants and the use of centralized infrastructure sometimes leave more digital traces for analysis. On the other hand, the scheme itself becomes more scalable and professional, thus more complex for operational response.

Therefore, in cases related to drainers, it is important to assess not only the fact of the theft of funds but also whether the victim is part of a broader incident of compromise, with access to accounts, browsers, emails, or other related services. This directly impacts both the future security of the assets and the effectiveness of legal and technical actions regarding their recovery.