SIM Swapped

SIM Swapped and Stripped: The Dangers of Text-Based 2FA for Cryptocurrency Accounts

Two-factor authentication (2FA) has become widely adopted as an additional layer of security for online accounts. By requiring something you know (like a password) and something you have (like a phone number), 2FA helps prevent unauthorized access even if only one of those factors is compromised.

SIM Swapped

However, a growing hacking technique known as “SIM swapping” has emerged as a serious threat, especially for cryptocurrency holders. SIM swapping, also called a SIM hijack or SIM swap attack, involves tricking a mobile carrier like T-Mobile into transferring a victim’s phone number to a SIM card controlled by hackers. With access to text messages, hackers can then bypass 2FA checks that send codes to the victim’s phone.

Once in control of a phone number, hackers have a direct line into many online accounts that rely solely on text-based 2FA for protection. This includes cryptocurrency wallets, exchanges, and other financial services. Without additional authentication steps, hackers can drain cryptocurrency balances, steal funds, and perform other damaging actions—all while the legitimate user remains unaware until it’s too late.

How SIM Swapping Works

To perform a SIM swap, hackers first gather personal details about their target, such as names, addresses, dates of birth, and account PINs. They then contact the victim’s mobile carrier pretending to be the account holder who lost or damaged their phone. By answering security questions correctly, hackers convince carrier representatives to transfer the phone number to a SIM card under the hacker’s control.

This process, known as “social engineering,” exploits human vulnerabilities in customer service systems. Representatives aim to help but may lack robust identity verification. Just a few correct details are often enough even without access to the actual device. Once the SIM swap goes through, all incoming calls and texts intended for the victim are rerouted to the hacker’s physical SIM instead.

From there, hackers can use text message-based 2FA recovery options or password resets to break into other accounts. For cryptocurrency users, this means draining wallets, withdrawing funds from exchanges, and stealing digital assets. The victim remains unaware until funds disappear or login attempts from unfamiliar locations appear in account logs. By then, it’s usually too late to recover losses.

Growing Risk for Crypto Users

As cryptocurrency values rise, SIM swapping attacks have grown more common and sophisticated. Hackers target crypto holders specifically due to the potential for large payoffs from even a single compromised account. Victims have reported losing hundreds of thousands—even millions—of dollars’ worth of digital assets this way.

Unlike bank transfers, cryptocurrency transactions cannot easily be reversed once complete. And since digital currencies operate on decentralized, permissionless networks, there are no central authorities that can help freeze or seize stolen funds. This makes crypto especially appealing and low-risk for sophisticated criminal hacking rings.

For users, the dangers are compounded by the fact that many popular cryptocurrency platforms still rely solely on phone-based 2FA. Hardly any implement additional authentication steps beyond text message codes. This leaves holdings completely exposed whenever a SIM swap occurs. Even savvy tech-literate users have fallen victim with no way to prevent or detect the hack immediately.

If you have been a victim of a SIM swapping attack, filing a lawsuit against your mobile carrier may help hold them accountable for failing to protect customers. T-Mobile’s security practices have faced additional scrutiny due to another data breach reported in 2023. This incident is said to have exposed personal customer details such as names, addresses, and account PINs. Many victims are still experiencing financial or other losses due to SIM swaps that occur despite reporting their device as lost/stolen. 

This indicates carriers still need stronger security practices. we’d recommend speaking to a reputable attorney who specializes in data privacy cases. They can evaluate if you have a case and advise you on your legal options, such as joining an existing class action or filing a T-Mobile SIM Swap Lawsuit. Pursuing legal action may compel carriers to improve identity verification and better safeguard accounts from hacking attacks, which seem to be increasing. Filing a lawsuit could help make carriers more accountable for customer security and data protection.

Recommendations for Stronger Crypto Security

As long as text message-based 2FA remains so widely used, cryptocurrency holders remain at risk of SIM swapping attacks. Some recommendations to better safeguard accounts and digital assets include:

  • Enable hardware security keys or authenticator apps that don’t rely on phone numbers for 2FA wherever possible.
  • Use separate devices for cryptocurrency activities and regular online use to avoid compromising holding details.
  • Consider disabling text message-based 2FA recovery options, which give hackers a direct path to accounts after a SIM swap.
  • Monitor accounts closely for suspicious login attempts and location changes that could indicate a takeover. Act quickly to secure holdings if anything looks abnormal.
  • Store most funds in cold storage solutions not directly accessible online whenever possible as an extra precaution.
  • Contact a reputed law firm for a confidential case consultation from an attorney if you were a victim of a SIM swap hack. Mobile carriers may be liable depending on the circumstances.

As hacking techniques evolve, so must security best practices. Adopting stronger authentication that doesn’t depend solely on phone numbers is critical for cryptocurrency users to better protect themselves in this growing threat landscape. Staying vigilant and pursuing all options for recourse after an attack can also help curb further criminal activity.