When you realise that your crypto exchange account or wallet service provider has disabled all forms of buying, selling, and withdrawal services, this is a sign of your account/wallet being “freezed”.
In a “frozen” state, there is nothing much that you can do except to speak to the exchange or wallet provider directly.
In cryptocurrency, owning the private keys to your wallet is the primary authentication to prove ownership. Therefore, it would be best always to store your crypto assets in a hardware wallet or use a secure and anonymous software wallet.
You do not own the private keys to your crypto assets when you deposit them onto a centralized exchange or wallet service provider. Therefore, the centralized service can halt, suspend, freeze or even close your wallet account in situations where they have valid reasons to do so.
Reasons for Crypto Exchanges to “freeze” your account
Here is the list of reasons your account can be “frozen” by the cryptocurrency exchange or wallet service provider that you are using.
1. Due to Violations of the User Agreement
For example, this can be in the form of an unauthorized transaction or an incorrect transaction being carried out. Another reason could be that it has a balance that must be reconciled for any reason.
Using the account in any dark market or crypto mixing services is commonly not allowed in most User Agreements.
What can you do?
Firstly, re-read the exchange’s User Agreement, especially where users must comply and agree not to do. If you are sure you did infringe any portions, explain to the Compliance Department or Customer Support Department in good faith.
Allow time for them to reconcile any differences and clear the air. Meantime, rest assured that your crypto funds will be untouched until the findings are out.
2. High Risk of Suspected Fraud Activities
Likely a high volume of suspicious or blocked wallet addresses involved in your account’s incoming and outgoing transactions. This list of addresses is gathered from suspicious internal transactions, as well as from using cryptocurrency investigation & compliance tools.
Other risks involve someone attempting to gain unauthorized access to the account, or the report has been implicated in being used to send or receive a ransomware payment or engaged in money laundering activities.
What can you do?
Prepare your documents and transaction timeline to explain your wallet’s activities.
3. Request from Law Enforcement Agencies
Yes, law enforcement agencies have the power to “freeze” your crypto account and wallet if you are using a centralized exchange or a centralized platform. In addition, in most countries where cryptocurrency exchanges are registered, it is required by law for companies to produce documents and information about their customers and comply, for example, with a Court Order or a Sanctions program.
Production of such documents may be in the form of a customer’s Know-Your-Customer (KYC) documents, such as photos of passport numbers and personal selfies. In addition, information can be IP addresses from login sessions, email addresses used during registration and other metadata.
What can you do?
Be cooperative with the investigation. The entire duration can be longer if it involves several parties. Be understanding as well.
4. Account Inactivity
For most exchanges, they may consider flagging and suspending accounts that have been inactive for more than two (2) years or more. This means they have been no signs of login sessions for a long time.
Workaround
Try logging in and contact Customer Support to provide recent KYC verification documents if failed.
5. Exceeded Maximum Incorrect Password Attempts
For security reasons, once you have consecutively entered an incorrect password several times, your account status will be “locked” or “frozen” for a certain period.
All you need to do is to wait and log in again. If you fail to authenticate yourself further, your account will be suspended or in a “frozen” state.
Workaround
Two (2) methods here.
Method 1: Initiate the <Forgotten your password> feature to reset your password. This allows you to change your new password.
Method 2: If the above doesn’t work, you should contact Customer Support. They will need to authenticate you using various identity methods, such as asking you to submit your identity card particulars.
6. Prohibited Conduct in Marketplace
Cryptocurrency exchanges have marketplaces that allow users to buy and sell cryptos and deposit and withdrawal services. Exchanges may “freeze” an account if they suspect it infringed marketplace code of conduct rules. Some of them include;
Fraudulent Acts
Engaging in any scheme to defraud, deceive or trick the marketplace.
Fictitious Transactions
Create or execute fictitious transactions or place any marketplace order for a fictitious transaction.
Market Manipulation
Any form of disruptive trading or manipulation generates unnecessary marketplace volatility or creates a condition where prices do not reflect fair market values.
7. Financial and Referral Abuse
Financial abuse happens when your account is involved in Ponzi schemes or used in crowdfunding for illegitimate reasons.
Referral abuse means colluding with others or using dummy accounts to gain monetary signup rewards or incentives through the exchange’s referral or affiliate program without providing any legitimate recommendation to the other party.
Summary
When using centralized exchanges or wallet service providers, always read through its Terms of Use to ensure that you do not infringe any of the misconduct the business has set.
When dealing with “frozen” accounts, always check with the Investigation/Compliance department to find out more. Then, cooperate and give the exchange ample time to carry their checks.
Always be sure of all your transactions, whether is it incoming or outgoing. A detailed timeline explanation of all transactions will come in handy when the account is “frozen”.
So long as you hold on to your wallet’s private keys and do not use a centralized exchange to store your crypto funds, your wallet will not be “frozen” by the service or authorities. Of course, law enforcement also has the power to conduct search & seizure for items that are relevant to their investigation, including your computer, mobile device or hardware wallet. You may be compelled under the law to assist in their investigation and provide your private keys.
