WHY A CRYPTO EXCHANGE MAY FREEZE YOUR FUNDS

Centralized crypto exchanges such as Binance, Coinbase, Houbi, and Kraken may freeze your account (crypto trading account) without warning. Making it impossible for you to access your bitcoins and other crypto assets. Freezing your crypto trading account implies that you cannot make standard transactions such as trading and withdrawal.

It may require your input to “unfreeze” the account and sometimes, it can be a precursor to the closure of the account. In any case, the doors to an appeal are always open to unfreeze your account and get your funds out.

Here are the top reasons why exchanges such as Binance, Coinbase, Houbi, etc. may freeze your crypto trading Account

1. Incomplete, Outdated, or Misleading KYC Documentation

Most major crypto exchanges will work within the regulatory framework of the region they operate and often that will mean they implement a “Know-Your-Customer” or KYC procedure for every client they onboard. You will often be required to submit a valid government means of Identification especially if you want to trade to a reasonable threshold. Your account could be “frozen” if at any time any of these is found to be fraudulent or misleading.

Sometimes, a crypto exchange may freeze your account if the details of your KYC are outdated or the pattern of your transaction has changed significantly.

2. You Participate in “Pumps and Dumps” Schemes

Pumps and Dumps are considered illegal by major exchanges. Pumps and dumps schemes are made up of groups of traders who artificially create a buying frenzy usually of low cap. tokens The goal is to momentarily increase the price of the token (“pump”) and then “dump” on unsuspecting participants; leading to huge financial losses.

Most reputable exchanges will discourage pumps and dumps on their platform and will freeze the account of the perpetrators. Binance Exchange explicitly prohibits “Pumps and Dumps’ in her terms of use.

3. You agree not to use the services for market manipulation (such as pump and dump schemes, wash trading, self-trading, front running, quote stuffing, and spoofing or layering, regardless of whether prohibited by law);Binance Service Usage Guideline , Section Under Restriction b.3

Your account may be frozen if you are suspected to have been an active participant in a pump-and-dump episode.

3. You Received Funds Funds From A Blacklisted Source or Wallet Address.

You could have your trading account frozen or suspended if you receive funds from a blacklisted wallet such as those linked to a hack. Sometimes, it may not be directly but as long as they are “dirty bitcoins or crypto”. It is the reason most hackers do not sell the proceeds of their illegal craft in centralized exchanges.

Avoid purchasing your crypto from questionable sources and attempting to sell it on centralized exchanges. Your account will likely be frozen if those funds are already blacklisted. Different crypto communities can blacklist a wallet, even the government, receiving funds from such wallets puts you at risk. (You can find some resources on blacklisting at https://cryptodefendersalliance.com/blacklist)

4. You Are the Subject of an Investigation

You can have your account frozen if you are the subject of an investigation, especially if public knowledge and of the common good.

5. Suspicion of Illegal Activities Such As Money Laundry, Criminal Activities

Regulated exchanges are required by law to report suspicious activities to regulatory bodies. If you are suspected of using your trading account to funnel funds for illegal activities drug deals, terrorism, trafficking, or weapon sales, or suspected of being linked to any illegal activities, your account may be frozen- subject to further investigation.

6. By Government Order or Regulatory Authorities

The funds in your account can be frozen based on the instruction of the Regulatory Bodies or the Government. -Usually when you are the subject of an ongoing investigation.

7. By A Court Order

A crypto exchange will have your account frozen if there is a Court Order (from a court of competent jurisdiction) to that effect. They are obliged to obey such orders especially if you in live in a highly regulated environment.

8. You Are Under-Aged

Binance and other major exchanges have a legal limitation for owning an account with them to be 18 years and above. If you registered for an account and were later discovered that you are below the legal age to enter into a contractual agreement. It is enough ground to freeze your account (and subsequently close it)

By registering to use a Binance Account, you represent and warrant that: (i) as an individual, you are at least 18 or are of legal age to form a binding contract under applicable laws; (ii) as an individual, legal person, or other organization, you have full legal capacity and sufficient authorizations to enter into these Terms;Binance Terms of Use – Elegibility

9. You are Suspected of Trying to Compromise the Integrity of the Platform Using Bots, Scripts, Hacking Tools

Binance specifically mentioned this in her terms of service. – Any activities that seek to gain access to information on the platform that is not publicly accessible will be viewed as a threat. Your account can be suspended for such actions.

6. You may not (i) use any deep linking, web crawlers, bots, spiders or other automatic devices, programs, scripts, algorithms or methods, or any similar or equivalent manual processes to access, obtain, copy or monitor any part of the properties, or replicate or bypass the navigational structure or presentation of Binance Services in any way, in order to obtain or attempt to obtain any materials, documents or information in any manner not purposely provided through Binance ServicesTerms of Service. Binance.com

10. Your Trading Volume Increased Significantly

Additional KYC is often required for certain thresholds on your trading account and temporarily freezing your account might be a way to push you to comply with your new trading threshold. For example, if you trade institutional size on a retail account.

Conclusions

These are things you should avoid to protect your account from being frozen. And if you should have your account frozen for no justifiable reason, You can always reach out to the support team for a review. Oftentimes, if it is something benign, you will have your account unfrozen.

Finally, you can always use a legal means to seek redress if you feel your rights are being violated by any exchange.

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