Immediate Steps After a Suspected Bitcoin Wallet Compromise: A Canadian Incident Response Guide

Discovering unauthorized activity in a Bitcoin wallet is stressful. This guide walks Canadian and international Bitcoin holders through clear, practical incident response steps you can take right away to limit loss, preserve evidence, and recover control. It balances rapid actions you can do in minutes with longer-term hardening and reporting steps, with special notes for Canadian banking, exchanges, and regulatory context.

Why a fast, calm response matters

An attacker moves quickly once they gain access. Reacting decisively reduces the attack surface, prevents further withdrawals where possible, and improves the chance of recovery or law enforcement help. This guide focuses only on immediate response and next-step planning for a single subject: responding to a suspected Bitcoin wallet compromise.

Recognizing a compromise

Before you act, be reasonably sure a compromise occurred. Watch for these red flags:

  • Unrecognized outgoing Bitcoin transactions from an address you control.
  • Login alerts, password reset emails, or 2FA changes for wallet or exchange accounts you did not initiate.
  • New devices showing in your wallet or exchange security settings.
  • Ransom notes, blackmail attempts, or someone asking for payment to avoid public disclosure.
  • Suspicious activity on associated email or phone number - possible SIM swap or account takeover.

Immediate actions - what to do in the first 60 minutes

These steps prioritize stopping further damage and preserving evidence. Do them in roughly this order:

1) Isolate compromised devices

Disconnect any device you suspect was used from the internet. Turn off Wi-Fi and unplug ethernet cables. If you suspect a mobile device compromise, enable airplane mode and disable Bluetooth. Do not power-cycle hardware wallets mid-signing if a signing operation is active; instead cancel safely when possible.

2) Preserve logs and evidence

Take screenshots of account activity, transaction IDs, login alerts, and any malicious messages. Export wallet or exchange logs if available. Record times, IP addresses shown in alerts, and device names. Keep notes on every action you take - this helps investigators and may be needed for exchanges or your bank.

3) Check exchange and custodian accounts

If you store funds on a Canadian exchange such as Bitbuy or Coinsquare, log into those accounts from a known-clean device and audit recent activity. Freeze withdrawals if the platform supports it, and contact the exchange security team immediately to report suspicious activity. Exchanges may be able to flag addresses and delay movement if you act fast.

4) Assess remaining funds and plan a safe move

If only part of your holdings were moved, you may be able to secure remaining funds. Consider these options:

  • Move remaining coins to a brand new wallet generated on an air-gapped device or a new hardware wallet. Generate a fresh seed offline - do not reuse old seeds or passphrases.
  • If you have private keys for the compromised addresses and you want to reclaim funds that remain, use a sweep to import the private key into a new wallet so that inputs are consolidated into new addresses under your control.
  • If the attacker has installed malware that can intercept copy-paste or clipboard operations, avoid copy-pasting addresses - use QR codes on air-gapped devices or verify addresses on the hardware wallet screen.

Sweeping vs sending - choose carefully

There is an important technical choice: sweep an exposed private key into a new wallet, or create a transaction sending funds from a compromised address to a new address. Sweeping imports the private key and spends the entire balance, creating a transaction from the original key to a new wallet. Sending from a compromised wallet requires signing on the compromised device, which may be intercepted. When in doubt, generate a hardware-signed transaction using a secure, air-gapped signer and PSBT workflow if possible. If you lack hardware signing, prioritize moving any remaining funds you can control using a clean environment.

Handling account takeover and SIM swap risks

Many compromises start with email or phone account takeover. Take these steps:

  • Secure your email account from a clean device: change passwords, revoke third-party app access, and enable hardware 2FA.
  • Contact your mobile provider to set a porting PIN or carrier-level freeze to block SIM swap attempts.
  • If you suspect a SIM swap already happened, inform your bank and exchanges immediately and request holds on outgoing transfers if possible.

Contacting Canadian authorities and reporting channels

Reporting does not guarantee recovery, but it helps create a trail and may assist law enforcement. In Canada consider:

  • Report to your local police detachment and obtain an incident report number.
  • Report to the Canadian Anti-Fraud Centre. They gather intelligence and can advise next steps.
  • Notify your exchange or custodian - regulated Canadian crypto service providers must follow FINTRAC rules and may have procedures to escalate theft claims.

When to involve cybersecurity help

If significant funds are at stake, consider hiring a reputable digital forensics firm or a cybersecurity consultant experienced in crypto incidents. They can help analyze logs, trace funds, and sometimes work with exchanges or tracing services to follow stolen coins. If you contact a forensics firm, preserve evidence and provide them with transaction IDs, screenshots, and logs.

Longer-term recovery and hardening

After immediate containment, focus on rebuilding a secure setup and preventing recurrence:

  • Rotate seeds and set up fresh hardware wallets generated on air-gapped devices. Consider using multiple hardware wallets in a multisig configuration for higher-value vaults.
  • Use a dedicated, clean device for managing keys when possible. Avoid reusing devices that were compromised until they are wiped and reinstalled from trusted sources.
  • Adopt hardware 2FA keys for email and exchanges, not SMS-based 2FA.
  • Keep wallets and firmware updated but follow a safe-update workflow: verify firmware signatures and download from manufacturer sites using a trusted connection.
  • Use passphrases with BIP39 seeds carefully - a passphrase adds security but increases recovery complexity. Document recovery procedures securely and share with a trusted executor for inheritance planning.
  • Consider multisig wallets - they reduce single-point-of-failure risk and make remote compromise less catastrophic.

Preserving legal and tax records in Canada

Keep detailed records of the compromise for insurance, exchange claims, and tax filing. Document lost amounts, transaction IDs, communication with exchanges and law enforcement, and any forensic reports. Canadian tax authorities still require reporting of dispositions even when theft is involved - consult a tax professional to record the incident properly.

Practical examples and lessons from common attack vectors

Many Canadian incidents follow predictable patterns. Understanding examples helps prioritize defenses:

  • Phishing + Password Reuse: Attackers phish an email password, then request password resets at an exchange. Defend with unique passwords and hardware 2FA.
  • SIM Swap Leading to Exchange Takeover: Thieves port the victim's number, reset 2FA, and withdraw funds. Mitigate with carrier porting PINs and hardware security keys.
  • Malware on Desktop Wallet: Clipboard hijackers replace addresses at copy-paste. Use hardware wallets for address verification or QR codes and use watch-only setups to monitor balances safely.

A short incident response checklist

  • Isolate suspected devices from the internet.
  • Capture screenshots, export logs, and record transaction IDs.
  • Secure email and phone accounts from a clean device.
  • Contact exchanges and ask to freeze or flag accounts.
  • Move remaining funds to a freshly generated wallet using secure signing methods.
  • Report to local police and the Canadian Anti-Fraud Centre; obtain report numbers.
  • Engage forensic help for high-value incidents.
  • Rotate seeds, adopt multisig, and improve long-term OPSEC.

Conclusion

A suspected wallet compromise is a high-stress event, but a calm, methodical response increases your chances of limiting losses and preserving evidence for recovery. For Canadian users, rapid contact with exchanges, awareness of FINTRAC-regulated custodian obligations, and reporting to national channels add important options. After the incident, focus on rebuilding a stronger, layered self-custody plan with hardware wallets, multisig, air-gapped workflows, and better account hygiene. Preparedness - not panic - is your best defense when the unexpected happens.

If you are currently experiencing a compromise and large sums are involved, prioritize contacting your exchange security team and local authorities while preserving evidence - and consider professional digital forensics for the best chance at recovery.