Investors get their funds back
For those lucky, a crypto exchange may try to recoup its losses and return funds to investors. This can be done in whole or in part, depending on the situation. For example, when Poly Network lost over $600 million in crypto in 2021, the hacker(s) returned all stolen crypto saying they always planned to. In other cases, the hacker keeps some of the loot to himself as a bounty for identifying a flaw.
Either way, investors don’t lose a penny, as the platform absorbs the loss to maintain investor confidence. Most of the time, however, investigators only recover part of the stolen loot by tracing the cryptocurrency wallets where the cryptos were sent. The ” cryptocurrency hunters » may find stolen cryptocurrency and charge a fee, but at least you don’t lose your entire investment.
Accept his losses!
Although cryptocurrencies cannot yet be regulated directly, companies involved in these sectors can. In countries like the United States, cryptocurrency companies need a license to operate as legitimate businesses. This means companies can file for bankruptcy, which Celsius and Voyager Digital did in 2022.
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Declaring bankruptcy relieves a company of its debt repayment responsibilities, but investors are not covered. Institutions like the Federal Deposit Insurance Corporation (FDIC) insure customer deposits, but there are no such protections for cryptocurrencies.
Therefore, investors have no recourse but to count their losses and hope for the best.
To date, for example, the investors who lost cryptocurrencies during the collapse of Mt. Gox have still not received compensation, which speaks to the deplorable state of the sector in this regard.