How Crypto Can Be Stolen Through Smart Contracts

Recently we noticed an interesting crypto scam case on Reddit, that clearly demonstrates how crypto can be stolen through smart-contract permissions rather than through a hacked wallet. The user reported that all funds from four separate addresses linked to his MetaMask account had been withdrawn about six days earlier. He emphasized that he had made no transactions, shared no seed phrase, clicked no suspicious links, and had done nothing unusual. He simply opened his wallet and discovered that everything was gone.

On the blockchain, however, everything looked perfectly valid: the transactions were signed with his private key, the funds moved to another address without errors, and there was no sign of a MetaMask compromise. For the user, it felt like the funds disappeared “by magic.” But in reality, nothing supernatural happened. The most likely explanation is that the user had previously interacted with a malicious smart contract and unknowingly granted it permission to manage his tokens. This type of situation is extremely common in Web3.

The case provides a useful starting point for understanding how smart-contract–based theft actually works. The sections below explain the mechanics of these attacks and why they succeed so often.

Key Takeaways

• Users often lose funds not through stolen seed phrases, but by approving malicious smart contracts that later withdraw assets without further confirmation.
• Fake or cloned DeFi interfaces can convincingly mimic legitimate platforms, leading users to sign approvals that give attackers full control over their tokens.
• Smart-contract attacks frequently involve delayed withdrawals, making the theft seem sudden and disconnected from the user’s earlier actions.
• On-chain activity appears completely valid to the blockchain, which means no system flags the theft as suspicious — the contract is simply exercising the permissions the user granted.

How Crypto Theft Through Smart Contracts Works

In most cases like this, the wallet owner personally signs a transaction that gives a smart contract the right to spend or move tokens. This usually happens when a user clicks “Approve,” “Enable,” “Allow,” or “Confirm interaction” on a DeFi website.

MetaMask's case shows a familiar confirmation window, the language looks routine, and nothing seems risky. But at that moment, the user often grants the contract unlimited spending permission. Once that permission exists, the contract can withdraw the user’s tokens at any time — immediately or weeks later.

This is almost certainly what happened in the Reddit case. At some point before discovering the missing funds, the user approved a malicious contract. The contract then waited for the right moment and swept the funds automatically.

How This Mechanism Appears in Practice

Fake DEX Interfaces or Imitation DeFi Platforms

A very common scenario begins with a user landing on a website that looks exactly like a well-known DEX such as Uniswap or PancakeSwap. The design matches, the layout is identical, and the “Connect Wallet” and “Swap” buttons appear trustworthy.

The user connects MetaMask and clicks “Enable token.” MetaMask opens a standard confirmation window. The user approves it, believing this is a normal step. But in reality, the contract behind the site is malicious and now holds full permission to pull the user’s tokens.

The site might even simulate an exchange or display fake liquidity numbers to appear legitimate. Later — hours or days — the contract automatically withdraws all tokens it has access to.

This is exactly why many victims report suddenly seeing coordinated withdrawals from multiple wallet addresses without performing any action themselves.

Phishing Through Fake Versions of Real Platforms

Another frequent method involves a cloned website with a nearly identical domain name. A user searching for a legitimate platform, such as a major DEX or NFT site, clicks on a sponsored link or a typo-squatted domain. The website looks real, including branding, colors, and interface.

When the user tries to swap tokens or add liquidity, MetaMask requests a contract interaction. But instead of a real protocol address, the user signs a transaction that gives control to a malicious contract.

This could easily have happened in the Reddit case if the user interacted with a legitimate protocol through a cloned website.

Smart Contracts With Delayed Malicious Behavior

Some malicious developers take a more sophisticated approach. They build a functioning platform — one that actually processes swaps or pays out rewards. For days or even weeks, everything appears normal.

Hidden inside the contract, however, is a function that lets the developer drain all user funds at once. The developer waits until enough liquidity is collected, triggers the hidden logic, and directs the funds to a single address.

Users describe these situations exactly the way the Reddit user did: “I didn’t do anything,” “the contract was working fine,” and “suddenly everything disappeared.”

Combined Attacks That Use Social Engineering

Sometimes technical exploitation is combined with psychological manipulation. For example, scammers may send users an airdropped token with a name that resembles a well-known project. Attempting to sell or interact with that token directs the user to a malicious interface that collects an approval.

Or a scammer posing as customer support may offer to “fix” a stuck transaction or “unlock” funds, sending the user to a smart contract designed to drain assets.

These hybrid attacks are extremely effective because they appear helpful or legitimate at first glance.

Why Victims Often Believe They “Did Nothing”

• The Delay Between Approval and Theft

A malicious contract may wait hours, days, or weeks before withdrawing funds. Victims rarely connect the approval they signed earlier with the theft that happens later, which is why these events feel random.

• The Familiar Wallet Interface

Wallet approval window often looks the same, and many users approve transactions automatically. The language inside the window is general and does not warn users about risks. As a result, people often do not understand they are granting spending permissions.

• The Blockchain Confirms the Activity as Valid

From the blockchain’s perspective, everything is legitimate. A wallet owner granted a contract permission, and the contract used that permission. There is no hack or abnormal behavior. The network sees it as a perfectly valid transaction.

This is why wallet providers and explorers simply reflect the event, rather than signaling fraud.

The Bottom Line

The Reddit case is not unusual. It is a typical example of how users lose funds in Web3 — through contract permissions rather than stolen seed phrases or hacked wallets. The wallet itself was not compromised. Instead, the user previously granted a smart contract the authority to move his tokens, and the contract used that authority exactly as coded.

These incidents highlight the need for a more careful mindset when interacting with decentralized applications. Every time you click “Approve,” you are giving a contract the power to manage your assets. That approval can remain active indefinitely and may be used at any moment without further confirmation.