Topic: Be careful of anything custodial (Read 134 times)

Since you transfer your coins to a centralized exchange, it means that you "transfer control or use rights" over your assets to them and you get a return in the amount of the balance. Of course, they will use the real coins you deposit for what they are entitled to under regulation. For the case of locked account, the exchange only reserves funds that are locked just in case the government wants to take over your funds or not.

It's difficult to determine in some cases, if it's in the scenario of a scam exchange, more often than not, they are new exchanges, and they lock users accounts immediately they deposit into it, then such act is clearly stealing; that's why users aren't expected to deposit funds into every new exchange they meet, and even if they must, then a tiny amount would do, so if the exchange turns fraudulent, the loss will be minimal.

Having said that, in cases of 'bigger' exchanges locking users accounts for one reason or another, it's somewhat subjective to them, and then remember that 'if it's not your keys, it's not your coins', they are centralized services and have a high level of arbitrary power, but I don't think it's possible they'll just outrightly steal users funds, they most times lock the account due to suspicious activity and then request further verification (funds will be lost if it's not provided) or lock the account based on government orders and wait further instructions (funds will be lost if user is found guilty of whatever), etc, it can't just basically be called stealing, but funds are being lost, the more reason there's 'a rule of thumb' forewarning users not to store funds in centralized exchanges cause in the end to a very large extent they do have the final say.

But I am very sure most of such cases are not related to government asking custodial services to lock it, I believe the custodial companies will in this case have the coins with them, a way they are the one stealing from others. Or is it not stealing? Some peoples accounts are locked and they are not scammers and also not involved in criminal activities. I have seen cases the victim will send them messages but nothing will still be done.

It completely depends on why the custodial account was locked in the first place. If the lock was through government request, then the government would probably request for access, or just leave the funds locked on the custodial service; again, depending on what the issue actually is.

Custodial exchanges will take the seized funds unless it is hacked fund. Even though these exchanges give individual accounts to every users these funds are not store in the individual wallets means hot and cold wallet so if someone is not accessing or not possible to access for whatever reasons the exchanges will keep using those coins from their cold storage while the figures on your account will be only left to the user.

Before the onset of cryptocurrencies, there were scammers, some people try all ways to make sure they avoid scam, some looks for many ways and have greater chances to not fall being scammed, that is why people need to know many of the ways scammers operate to scam people, this will help people to avoid the bad online actors.

The main reason for this thread is not about scammers but about custodial companies that are now making use of cryptocurrencies to easily scam people. These custodial companies are legit exchanges and other ones like crypto gambling sites and others that their users make use of cryptocurrencies as deposit and withdrawal.

Many people because of privacy make use of bitcoin coinjoin wallet, they will deposit into such their account, but their account will be locked, I know many people that are not scammers make use of wallets that coinjoin, payjoin or mixes. They will not know that exchanges or other companies like that will know such transaction, they will pay bitcoin into their account on the company site and their account will be locked,they will be unable to use the account.

It is not only about coinjoin, but many other reasons why account will be locked. That aside, there are many other ways these companies are making money from people, like:

1. Paying a token into your account that their company is not yet supporting, the token will be lost
2. Mistake deposit of bitcoin into bitcoin cash address or otherwise
3. Not making use of memo, tag or message for coins that support it like binance coin and ripple

My advice
1. Have your private key
2. Depend more on noncustodial wallets
3. Make use of noncustodial exchange if it can carry out the task your want
4. Do not send coinjoined bitcoin to custodial exchanges
5. Also, not among but necessary. Try all ways to avoid scammers.

I am not saying you should not make use of custodial companies, but be careful of all ways they can steal your coins. Know that if you want to have the full control of your coin, you need the private key, custodial companies can not give you the private key, they have it. But noncustodial wallets will generate private key for you.

I have a question
Where are the coins of the custodial account that are locked be transferred to. With it be transferred to the government or the exchange uses the power they have to let the coins remain with them which is a scam.