Topic: How to protect yourself from being blocked on a crypto exchange (Read 334 times)

Yes, this website is a good one to get platforms that do not require KYC, that being said, many people stick with centralized exchanges because of higher liquidity, though that is no excuse to keep assets in them, they should only be used for trading, and that's all.
Mind you that your account in any centralized exchange can be locked for any flimsy or illogical reason, thus do not rule anything out, not your keys, not your coins.

I don't think it can cause any problem to you, because exchanges have already blocked some severe addresses that received funds from illicit activities. But let's say I receive funds from an address that was not black listed then they will check the AML score which should be low, although AML score is if high it does not mean that the funds are from bad origin because sometimes one account is receiving funds like from airdrops or from spammers and that wallet can have high AML score and once that wallet send generic funds to a new wallet that new wallet also gets high AML not that high or not that quickly too.

Point is IMO this is not a real problem, I never saw any cex account getting restricted because the address received funds from some illicit address. If it's real I hope no one would face this situation.

Before entering into an exchange, you agreed with its terms and conditions, and I guess you are overthinking it. Why do other people send a bitcoin to an unknown account so they waste their money? Some of the exchanges right now are accepting funds from the casino. Just make it suspicious if the account has no history of transactions and makes a large-scale deposit or withdrawal. If it happens the transaction confirms already you cant do any thing that will be created to your account most likely they have a prompt that a transaction committed and credited to your balance at this rate you can make an early appeal.

And in such manner, the best idea will be to prevent your Bitcoin wallet address from been exposed publicly where scammers will be able to have access to send a tainted Bitcoin into it, that will then results to the freezing of your accounts. Because one thing that is certain is that an exchange or a crypto casino can not ban a users account if he/she has not gone against it's rules and regulations, which is why as a user, it's always advisable to have a detailed understanding about the rules and regulations of whatever exchange or casino you are using.

Sometimes, they are unavoidable, unfortunately.

To protect yourself against that, if someone wants to send some coins to you, you need to be sure (ask the person if possible) that the coin is coming from a trusted source. Also, if you get notifications on your exchange, always open the notification to know what it's all about. Sometimes, if you receive tainted coins into your exchange account, before your account will get restricted, the exchange is going to notify you and they will give you some days to respond to their message but if the stated date is due and you don't give them any feedback, that's when they will block your account.  Although some exchange might block your account instantly pending on their terms and conditions but I had such encounter once on the binance exchange, my account was not blocked because I responsed to their message to clarify the source of that deposit.

Well I'm going by what Coinbase was known to do in the past in regard to inexplicably locking people's accounts even much more so then their competitors.
Maybe they had legit reasons to do so, maybe they didn't. Well it's possible they are doing it a lot less these days, but I wouldn't know.

Maybe they were afraid of not being in compliance with strict AML laws and became overzealous in locking accounts to avoid accusations of being LAX on AML. Perhaps their fears turned out to be somewhat justified after the Binance CEO CZ was prosecuted for alleged LAX AML compliance. Or maybe they just used it as an excuse to steal their customer's funds. I don't know. I have used them succesfully for many years so CB never did anything bad to me personally, but I heard many complaints from others so it seemed like CB always had an unusually high rate of locking accounts. Perhaps previous administrations that were unfriendly to crypto made CB feel undue pressure to comply with overbearing AML laws. But now that a much more pro-crypto government is about to take power Coinbase won't have anymore excuses to lock accounts and perhaps will stop doing so.

Make sense! That's why we must not always just tick the checkbox of "agree with TOS" when we are signing up on these centralized exchanges because inside of that there are a lot of terms and conditions that may not be suited to you and in the future you will encounter it.

Coinbase is a legal entity that is literally on the Nasdaq stock exchange as well. They can't just block your account without giving a proper reason and be able to come against a court to explain why they did that. If you have a proper reason why your account shouldn't be blocked and you know you can trust yourself, then you can sue them, and they would have to explain themselves as the defendant in a courtroom, which they would not want because anything like that looks terrible for the investors as well.

No company with stock on the market would want to have a lawsuit against them, so if the yare blocking your account, they must believe that they can win anything and won't mind it if it goes to court, hence why it's pretty decent chance that if you did nothing illegal, then they won't block your account.

Read terms of doing buusiness with each exchange you are dealing with or trying to deal with , avoid receiving cryptos from any known hacker or scammers or in indulge in srt of money laundering and which can be trace back to you, I believe if you do these necessary things in place,  your chances of getting blocked by an exchangeer has reduced, However,  best thing to do is Never store your cryptos in an exchange because not your keys not your cryptos,  and there's 1% chance that they can still block you even for no reason and you won't get access to your funds.

I found an aggregator of exchange platforms/services that don’t require KYC/AML, in case anyone’s interested.  https://kycnot.me/ But please be very careful.

Kraken is pretty reputable as far as centralized exchanges go. But I would not trust Coinbase for doing any significant transactions.
Exchanges that are known to randomly freeze people's accounts like Coinbase without any explanation? To me that is a very shady practice.

Another alternative is to get your bitcoin through an ETF or brokerage like Webull, Robinhood, Schwab, Fidelity, Van Eck, or even Paypal, Square, Venmo, etc.
I never heard of a brokerage freezing anyone's accounts. I have good experiences with P2P exchanges like Bisq and others.
I also heard good things about River Financial and The Bitcoin Well. There are many better alternatives to Coinbase.

I agree with you that is ridiculous.
 I think the problem isn't with the haters. It's just an additional lever to influence people and another "legal" way to take their money when it's convenient.

Thanks, guys, for your responses. It was interesting to read your opinions.

Although Binance is the largest and most reputable exchange on the market and as far as I know they have over 7,000 employees but they don't have many offices around the world, most of them work remotely. So filing a lawsuit is actually quite complicated or impossible. For online complaints it takes a lot of time and generally if someone is unlucky enough to have their account frozen it is the big hassle.

I have seen a few cases of accounts being frozen by Binance and one of the tips I learned is. In most countries Binance has a support team, so if we want to get things resolved quickly. We should seek and ask for help from the support team in our country, then everything will be resolved faster instead of working directly with the online staff of the exchange.

I have seen 3 cases of Binance freezing and all 3 were resolved with the help of the support team in my country.

Yeah, it's about throwing a fishing rod: you should understand what you do and what are chances, as well the risks that arise.
That's why we need to keep the funds there only if necessary.

Yes, but it's obvious that they could be traders and not necessarily used them to store their Bitcoins as they know the risk.

But in any case, we really don't know the source of our Bitcoin, whether tainted or not and that is really a big problem. Maybe you can just explain to the exchange itself that you don't know the origin and that it was send to you by someone.

So I guess the concept of "tainted" coins is a slippery slope for now.

Your concerns are not unfounded, because when using the services of 3rd-party service providers (exchangers), you find yourself in their power (your deposit is in their hands). And it may turn out that for one reason or another, these service providers can withdraw the contents of your deposit. What to do with this? Either use at your own risk, realizing that such a situation may arise, or use other services, such as p2p exchange, like bisq.

There is only one way to protect yourself - don't give your money to these service providers (exchangers) for safekeeping/ownership.

Of course - there is always a reason why an account was blocked by the exchange, but sometimes the reason doesn't make sense. The exchange and each centralized service has terms and conditions that must be complied with and agreed to by its customers. This doesn't only happen on centralized exchanges - but in casinos we often hear about the same cases too.

Unreasonable account blocking from exchanges appears to be rare and generally the exchange will explain why the account was blocked. Customers still have the opportunity to unblock it by contacting customer support – but this will obviously take some time and effort. However to avoid being blocked - then each customer needs to comply with the applicable rules or terms and conditions or else try trading on a fully decentralized exchange.

It may be an accident of sorts too - surely, exchange can think one thing, and you  yourself - something else.
In the end, the thing at stake would be time, because you will need lots of time to proof something to a centrilized entity.

I have used a centralized exchange for more than 2 years, and so far it has not found any problems, so if a person finds his account in the blocked by the exchange, surely the exchange has a strong reason to block the account, whether they use the exchange to transact on the activity illegal or other things that violate their rules. and therefore a person is necessary to ensure that their account is not involved in illegal activities that violate the terms of service from exchange. if necessary, one must ensure that they receive money from an address that is not associated with any criminal acts, so that their account will be safe.

There is no such thing as "dirty" or "tainted" bitcoin. It's a term invented by the enemies of Bitcoin and everything it represents. Try to apply that same "dirty" money concept to cash to see how ridiculous it is. Imagine you walk in to my store to buy something. You hand me a $50 bill, and before I accept it, I tell you that I will have to check it for illegal substances. I discover heroin residue at the back of your bill, so I confiscate it and instruct my security guard to arrest you and call the police. We take your wallet and all your cash and hand it over to the police. You will now have to explain to them who you are and prove you are not a drug dealer, as well as answer questions about why you have bills that show traces of heroin on them.

Would you ever come to my shop again? I assume the answer is no. Don't use centralized exchanges that support this nonsense. Use DEXs, P2P trading, and well-known non-custodial wallets, and advice your friends and fellow crypto users to do the same.

I used mostly Kraken and Coinbase, and the US version of Binance before they became restricted.
I never heard anyone getting their account frozen on Kraken. But I read a lot of complaints about Coinbase freezing accounts.

I personally never had a problem with Coinbase in that regard, been using CB since 2018. But they are known to have server issues when it gets very busy and their servers can't handle the traffic and your transaction could get stuck at a crucial time when you need to urgently buy or sell. So I prefer Kraken over Coinbase.

But my first choice are P2P exchanges like HODL HODL or Bisq over any CEX. I only use Coinbase for small transactions.

I used Swan Bitcoin a couple of times about a year ago to buy some bitcoin. The first couple of times went smoothly and I was able to withdraw my bitcoin.
On my third buy with Swan, which was for the same amount as the last two buys, they inexplicably froze my account.
When I asked what the hell was going on they told me my funds would be released after 60 days.

They said they were not accusing me of any wrong doing but they were freezing my bitcoin anyway. What kind of BS is that??
If they are not accusing me of wrongdoing then why the hell are they freezing my funds for?? They never gave me any reason. It was completely arbitrary.

Never had any problem with any exchange freezing my account up until then. Well 60 days came and went and even after 70 days they still did not release my bitcoin.
Bitcoin is supposed to be PERMISSIONLESS and Swan often touts the permissionless nature of bitcoin in their marketing but Swan itself is FAR from permissionless and is just as bad as the fiat banks if not worse. I was surprised and shocked because Swan seemed like a pretty reputable exchange. I will never use Swan again.

I had to scream and curse at them through phone and email and threatened legal action until they finally relented and sent my bitcoin to my hardware address after 75 days.

To protect yourself from something like that, you don't have to use CEX and still keep your Bitcoin in separate wallet which you never share to anyone. But still that is a risk that we may get if we use CEX and get a sends Bitcoin in small amount. If exchanges blocking our accounts, we can explain that we don't related to that and we even don't know who they are.

Maybe CEX will not believe us but we should try to explain as we can. That is why we don't have to store our coins in the centralized exchanges to avoids that such thing.

It's easier to said than done.

Is there a case where a customer file a lawsuit against the exchange and the customer won? or do you have personal experience about it?

I'm not sure where you live, but imagine if you live in a country where was no Binance offices (I mention Binance is the most legitimate exchanges for majority people), how do you file a lawsuit? not to mention the cost you need to pay using your own pocket.

A good choice would be to diversify the funds across different exchanges.
Better yet - across different wallets besides that.

Read the terms. You can also use that for your own protection. If you are flagged on an illegal act that is not written in their terms then you can file a case against them and use the terms for your own advantage.
To avoid this from happening, use legitimate exchanges. And to avoid more don't put all your eggs in one tray. Keep it in a secured storage. Exchange are meant to be used as a trading platform and not a storage which many people does today. It's wrong. So that even if they freeze your account, it won't hurt that much.

In general, you should not keep much of your assets on CEXes and have there only the amounts you would use daily for something - all the rest should go to cold storage / etc. Especially your BTC.

Some Exchange may freeze accounts upon detection of coins that have linkage to illegal activities, even when you received them without your knowing. There have been situations where individuals lost access to their funds because some tainted bitcoins ended up in their wallet. At the same time, however, not all exchanges handle this the same way, and some are more concerned with the big picture in transaction history than with punishing users over random unsolicited transfers. You can protect yourself by using tools that search the history of the Bitcoins you receive and by sticking to exchanges that have very clear, fair policies regarding this issue. And even better, you can protect yourself by not storing large amount of Bitcoin in a centralized exchange for a long period of time.

Or you are in for a ride for a month or two before they will get the info they need to unfreeze you..

The best solution is avoid to use centralized exchanges, use no KYC exchange on kycnot.me, so there's no chance you would end up in this ridiculous drama.

It's why coin control exist.

If the abuser sends small amounts directly to your exchange's address, it's an another problem, but I've never heard such case. Most likely you can make a deal to let the exchange only confiscate the coins that related to high risk funds and you can still withdraw the rest of the funds.

One mistake people do is give people their exchange account address. I don't like that. You can give them a wallet address and after receiving bitcoin in the address, you can send to the exchange address. This maybe not save you completely but it might minimize your risk of exposure.
When it comes to exchange, you can't even know when they'll freeze your account because you have no idea where the bitcoin is coming from.

You can also make sure your follow their rules and don't break any.
Unauthorized withdrawal is also a thing that can cause your accounts to be blocked. Don't try to withdraw money into an unauthorised account.
Also, don't give false KYC.

First, Op, you'd need to understand that tainted bitcoin doesn't mean btc that has gone through theft or dark roads, it's simply the correlation between two addresses. That said, to avoid getting banned by exchanges for receiving suspicious transactions it's preferable to only purchase Bitcoin from regulated exchanges, or use tools like AML quppy bot (I haven't used it before) but applications similar to this are used to trace the origin of coins in a pattern that detects suspicious activities...

Maybe the best advice should be to avoid using centralised exchanges and be free from their troublesome ones once and for all because you can't completely snub bad actors; sometimes those actors might not have any personal problem with you but just want to try out something.
 
They can just go online and search for an address that just conducted a transaction recently and make a random selection. You never can be too sure which address will be picked; as long as you have used your address to send in a transaction, it's public. The only thing is that your identity is not publicly attached to it; only the exchange can see it. 
 
In such a case the person just has to be ready to explain to support how they don't know anything about such a transaction; we never can be too careful when we are using a centralised service.

Just as exchange have what is called, Know your customers (KYC) same thing you should do as an exchange user try as much as possible to avoid sharing our wallet on public domain to avoid bad actor's sending dirty coins into your wallet d avoid receiving money from mixer platform's, Because exchange have it terms against funds comiin from mixer at at some pointheir are flagged as dirt coins.

Gambling also although some exchange including binance are now friendly to gambling deposits if not in some regions funds from casinos can also get your exchange account blocked.

There was a story like this recently. A friend had sent some Bitcoins to another friend's wallet. Both parties had their account blocked by Binance. While the sender was able to have their account unblocked their account after time, the recipient still had to contact their customer support to resolve this issue. To protect account from blocked ensure that the deposits are made from tested and trusted parties. This is also difficult because you don't know if the account where the Bitcoin originated from was already flagged by INTERPOL or other security agencies. Sometimes crypto exchanges may block the account of the a person if they get Bitcoin from an online casino. Take note of this too.

The truth is that over 90 percent of instances of account blocking is from Centralised exchanges mainly and that's because they have rules and regulations that are way too strict and obviously must comply with a couple of government regulations which on the other hand may not favour you.

To avoid being banned or getting a frozen account on Centralised exchanges you have to make sure you properly understand their rules and regulations as well as their terms and conditions. I've seen some discussions about CEX freezing accounts tied to addresses that have relationships with casinos  I'm not too sure about the gist of it but it's very likely to be part of their terms and conditions policies.

I've seen different discussions talking about flagged addresses however the thing is addresses don't actually get flagged that easily in reality because it takes something quite intense to get an address flagged.

Hi everyone, I’ve got another question that’s been bothering me. There are lots of stories about crypto exchanges blocking people’s accounts without any warning or proper investigation. One of the reasons for this is “dirty” bitcoins (AML issues). For example, if an abuser sends small amounts of these tainted bitcoins to random people, and they end up on an exchange, the exchange might freeze your account and take all your funds. On top of that, your wallet could get flagged as suspicious.
Am I understanding this right? How can you protect yourself from something like this?