SIM Swap Attacks: How Crypto is Stolen

SIM Swap Attacks: How Crypto is Stolen

The rapid evolution of technology has significantly reshaped how financial transactions are conducted, with cryptocurrencies emerging as a revolutionary force in the global financial ecosystem. However, this newfound convenience and freedom in digital currency come with its own set of vulnerabilities, one of the most devastating being the SIM swap attack. This method of cyberattack is responsible for millions of dollars’ worth of crypto theft worldwide. Here’s a detailed look at how SIM swap attacks occur and how they are used to steal cryptocurrencies.

Real-World Examples of SIM Swap Attacks in Crypto

Several high-profile SIM swap attacks have occurred over the past few years, demonstrating just how devastating this type of attack can be for cryptocurrency holders.

One notable case involved Michael Terpin, a prominent cryptocurrency investor. In 2018, Terpin fell victim to a SIM swap attack, which resulted in the theft of $24 million worth of cryptocurrency. Terpin later sued his mobile provider, AT&T, for failing to protect his account, accusing them of negligence that allowed the attackers to gain control of his phone number.

Another case occurred in 2019, when a hacker named Joel Ortiz was sentenced to 10 years in prison after stealing more than $5 million in cryptocurrency through SIM swap attacks. Ortiz targeted multiple victims, including cryptocurrency entrepreneurs and investors, by exploiting weaknesses in mobile provider security systems.

What is a SIM Swap Attack?

A SIM swap attack, also known as SIM hijacking or SIM swapping, is a form of identity theft that involves taking control of a victim’s mobile phone number. The goal of the attacker is to gain access to personal and financial accounts linked to that number, including cryptocurrency wallets, exchange accounts, and other financial platforms that rely on SMS-based two-factor authentication (2FA).

The crux of this attack is the exploitation of telecom service providers' customer support systems. Attackers deceive mobile carriers into transferring a victim’s phone number to a SIM card they control. Once they successfully execute this swap, the attacker can intercept calls, SMS messages, and, most importantly, authentication codes, which are frequently used to secure crypto-related accounts.

How SIM Swap Attacks Work

Here’s a step-by-step breakdown of how SIM swap attacks are carried out:

1. Gathering Information

SIM swap attacks typically begin with the attacker gathering personal information about the target. This can be done through phishing, social engineering, data breaches, or buying information from illicit websites. Attackers aim to collect details such as the victim’s full name, phone number, email address, date of birth, and potentially sensitive information like social security numbers.

2. Deceiving the Mobile Provider

Once enough information is gathered, the attacker contacts the victim’s mobile service provider and pretends to be the victim. Using social engineering tactics, the attacker convinces the carrier to transfer the victim's phone number to a new SIM card. This often involves creating a fabricated story, such as claiming the victim’s phone was lost or damaged, and persuading the carrier to activate a new SIM.

3. Taking Control of the Phone Number

If the mobile provider falls for the attacker’s ploy, the victim's phone number is transferred to a SIM card controlled by the attacker. The victim will suddenly lose cellular service, which is a tell-tale sign that a SIM swap attack is underway. Meanwhile, the attacker now has full control over the victim’s phone number.

4. Accessing Crypto Accounts

Once the attacker has control of the phone number, they can access accounts secured by SMS-based 2FA. Many cryptocurrency exchanges, wallets, and platforms use SMS 2FA to authenticate logins or authorize transactions. When the attacker tries to log in to these accounts, they can request a password reset or a two-factor authentication code, which will be sent to the hijacked phone number. With this information in hand, they can quickly take over crypto accounts.

5. Stealing Cryptocurrency

With full access to the victim’s crypto wallets or exchange accounts, the attacker can initiate transfers of cryptocurrency to addresses they control. Because cryptocurrency transactions are irreversible and anonymous, recovering stolen funds is extremely difficult, if not impossible.

Why SIM Swap Attacks Are So Dangerous for Crypto Users

Cryptocurrency users are particularly vulnerable to SIM swap attacks for several reasons:

1. Irreversible Transactions

One of the defining features of cryptocurrencies is the fact that transactions are irreversible. Once funds are transferred out of a wallet, they cannot be recovered unless the recipient returns them, which is unlikely in the case of an attacker. This makes crypto an attractive target for SIM swappers.

2. Anonymous Nature of Crypto

Cryptocurrency transactions are typically pseudonymous, meaning that while transactions are recorded on a public blockchain, the identity of the wallet owner is not revealed. This anonymity makes it difficult to track down stolen funds and identify the attacker.

3. Reliance on SMS-Based 2FA

Many cryptocurrency platforms and exchanges rely on SMS-based two-factor authentication (2FA) for added security. However, this method is inherently vulnerable to SIM swap attacks. If an attacker gains control of a user’s phone number, they can bypass SMS-based 2FA and gain full access to the user’s accounts.

Protecting Yourself from SIM Swap Attacks

Although SIM swap attacks are difficult to prevent entirely, there are several steps you can take to protect yourself and your cryptocurrency from this type of attack:

1. Use App-Based Two-Factor Authentication

Avoid using SMS-based two-factor authentication whenever possible. Instead, opt for app-based 2FA methods, such as Google Authenticator or Authy. These apps generate time-sensitive codes directly on your device, making them more secure than SMS-based methods.

2. Enable Multi-Layer Security on Your Accounts

Many cryptocurrency exchanges and wallets offer additional security features, such as hardware-based authentication (e.g., YubiKey) or biometric verification. Enabling these security features can provide extra layers of protection.

3. Secure Your Mobile Account

Contact your mobile provider to add extra security measures to your account. For example, you can request that a PIN or password be required for any changes to your account. Some carriers also offer account-locking features that prevent SIM changes without your explicit authorization.

4. Monitor Your Mobile Phone Activity

If you suddenly lose service on your phone for no apparent reason, this could be an indication that a SIM swap attack is in progress. If this happens, immediately contact your mobile provider to investigate.

5. Be Cautious of Phishing Scams

Many SIM swap attacks begin with phishing. Be cautious when receiving unsolicited emails, texts, or calls asking for personal information. Always verify the legitimacy of any communication before providing sensitive details.

Conclusion

SIM swap attacks are a growing threat to cryptocurrency holders, as they exploit weaknesses in both mobile carrier systems and SMS-based two-factor authentication. While no defense is foolproof, understanding how these attacks work and taking proactive steps to protect your accounts can significantly reduce the risk of falling victim to a SIM swap attack and losing your valuable crypto assets.