With the growing popularity of cryptocurrencies, regulators are increasingly turning their attention to bitcoin exchanges, and the latter are more closely monitoring transfers. Against this background, cases of blocking or freezing transactions and accounts by platforms have become more frequent.
Juscutum law firm lawyer Andrey Martsinyak told ForkLog why cryptocurrency platforms block user funds and what to do if this happens to you.
Why did the exchange freeze/block an account or transaction?
The most common reason for blocking assets is “suspicious” transactions. These may include:
- transactions with cryptocurrencies acquired illegally. For example, as a result of fraud or illegal activities (the so-called “dirty” cryptoassets);
- transactions related to the transfer to a crypto wallet of an amount in cryptocurrency that is too large for a particular user.
There were cases when the exchange blocked the client's access to funds in connection with the entry into force of the decision of the court of foreign jurisdiction on the “freezing” of the cryptocurrency account (freezing order) for the duration of the case, Martsiniak noted.
What what to do if the account is blocked?
First, you should promptly start communication with the support service. The initiative can come from both the exchange and the client itself.
Sometimes, after blocking, the trading platform immediately sends a letter with the corresponding requirement. This can be either a request for an explanation of the purpose of a particular transaction, or an instruction to withdraw your crypto assets in connection with the closure of an account without explaining the reasons.
«At this stage, it is critical to respond as quickly as possible. Even if you have nothing to answer “essentially”, you should write a letter in any case,” Marciniak emphasized. >”Your letter has been received. Please allow time to collect the information you request and/or engage a lawyer to provide answers to your questions.”
Delay on the part of the client will only exacerbate the suspicions of the exchange, which may complicate the unlock procedure.
Second, you should try to determine why the transaction is frozen or the account is blocked.
«Why “try”? Because in some cases, the exchange does not have the right to disclose the reasons for blocking an account/transaction», — said the lawyer.
This is mainly due to investigations conducted by law enforcement agencies in relation to crypto assets held on the client's account on the exchange.
It works like this: the platform receives a request from law enforcement officers with a request to freeze a certain transaction/account for a certain period. The reasons for blocking in such cases are not disclosed, since the account holder may be suspected of committing an offense under investigation.
If the exchange explains the reasons for blocking, it will become clear what documents should be provided to remove the restrictions.
Third,you need to be prepared to provide proof of funds. They must be proportional to the blocked amounts. In addition, documents should clearly and clearly describe the essence of the user's activity.
«If you know that you should receive a large amount of funds in cryptocurrency, it’s better to prepare documents in advance confirming the legality of the operation», said Marciniak.
Such documents can be, for example, an agreement on the sale of property, the funds from which you transfer into cryptocurrencies, a bank statement, a certificate of income, and the like.
When communicating with the exchange, it is important not to harm yourself, emphasized lawyer:
«For example, saying that you use an account created in your grandmother's name and verified on her behalf is a bad idea. Almost all exchanges have a rule that cryptoassets must belong directly to the person who went through the KYC procedure, that is, the owner of the account on the exchange».
Preliminary collection of documents, their operational providing the site upon request will lead to a faster unfreezing of the account and/or transaction.
«Maximum transparency of operations and preparation will be able to secure your crypto assets and save your nerves», Marcinyak summed up.
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