Why bank freeze happens - Detailed version

[Bitcoin Smith]

If you guys remember that I shared something "How to Unfreeze bank account - Detailed version that explained really well, what are the things that we can do to unfreeze the bank account whether it's debit freeze or just lien for particular amount and I wanted to talk about why and how these bank freeze happens for a while.

There are multiple reasons why bank freeze happens but the most common one is we received funds that is part of an ongoing scam that is currently being investigated.

Let's say Rahul who received funds into his bank account from Rajesh's own bank account of 5000INR. Both Rajesh and Rahul doesn't know the origin of funds but Rahul is in tier 2 here while Rajesh is in Tier 1. Now let's see how Rajesh received this funds and let's say it is from Meena who bought something whether it's bitcoin or any goods or service that Rajesh provides for his survival and Rajesh uses that money to buy bitcoin and sell as part-time job on Binance p2p or any such platforms.

Who is Meena, someone is being scamming people in many ways like social engineering scams, fake reviews, part-time job scams and thousands of others provides a bank account that receives funds from different users who thinks they are buying something, or as a fee for a course, etc.and after a while they realize they are being tricked by a scammer called Meena and raise complaint using bank account details and necessary documents then the cyber crime department investigate and block all the TXs went from Meena's account but the twist is by the time these things are happening Meena will be successfully sold all their INR to some goods or simply bought bitcoin with it this is where Rajesh comes into the picture and Meena just vanished without any trace. So the police department assumes that the funds that are channeled through Meena's account is still in the hands of the scammer but what really happens is, both Rajesh and Rahul — completely unaware of the scam — become collateral victims in this chain of transactions.

Rajesh, who only thought he was doing a legitimate P2P trade by accepting INR from Meena and sending her Bitcoin in return, unknowingly becomes part of a scam trail. Rahul, who later receives funds from Rajesh. As a result, the bank is instructed to freeze the accounts involved in the chain, not just Meena’s. Unfortunately, Rajesh and Rahul, who didn’t know the origin of the funds, now face a bank freeze without understanding what they did wrong. The actual scammer is in lose while the victims has to face the investigation and proves that they are not part of this.

This is how innocent P2P traders get caught in financial crime investigations. And because of the law is built to freeze first and ask questions later to prevent further laundering or withdrawal, these innocent users end up locked out of their funds.

*I tried to keep it short as much as I can while explaining how these things works, hope this might be helpful to understand how who didn't do anything still get in trouble because of the laws and how these things are processed in our country.

[TheUltraElite]

Nicely explained and I hope people read this and understand enough to explain it to others in simple language.

For now there is no proper solution to this problem. The people who have been dealt tainted money, may end up any day with frozen accounts. Hence to be safe avoiding fiat in the middle of a crypto transaction seems to be the best way to avoid this.

[pawanjain]

*I tried to keep it short as much as I can while explaining how these things works, hope this might be helpful to understand how who didn't do anything still get in trouble because of the laws and how these things are processed in our country.

You should have also written a TL;DR version of the post.
While I know it's a detailed version and people should give it a read, it would have been nice to have a short version too.
May be a one liner of each reason why the funds in our bank account gets frozen.
Anyway, it was a nice post and people should be aware when they are making P2P transactions and try to trade with trusted sellers only.

[avikz]

Very nice and simple explanation!

Yes, P2P traders come with risks of receiving bad money which can become a cause of frustration if the account is frozen.

However, in recent time I believe one of the high courts of the country has ruled out freezing the entire bank balance in such cases. I am unable to find the reference now but I will try to do so.

Legal proceedings in India is extremely slow. So if someone's bank account is frozen, it will take years to get justice unless you can employ a high ticket lawyer.

[Bitcoin Smith]

However, in recent time I believe one of the high courts of the country has ruled out freezing the entire bank balance in such cases. I am unable to find the reference now but I will try to do so.

Legal proceedings in India is extremely slow. So if someone's bank account is frozen, it will take years to get justice unless you can employ a high ticket lawyer.

Yes, it's Madras high court that said "only the amount under suspicion can be frozen; freezing the full account violated fundamental rights (Article 19(1)(g))." and this is what the user said here too,

The Court Ruled:  
✅ Only the disputed amount can be frozen, not the entire account.  
✅ Freezing my entire account was illegal (based on a similar case in the Madras High Court - W.P. No. 25631 of 2024).  
✅ ICICI Bank was ordered to hold just ₹175 and unfreeze the rest.

After eight months, I finally got my money back.

But RBI yet to create standard framework policies based on this so banks can still use their power to freeze the entire balance instead of the amount is in suspicion so we have to take the legal battle and a bit of time to unfreeze the account and only the lien will be marked for the flagged transfer amount.

You should have also written a TL;DR version of the post.

I thought making it any shorter will not give the clear picture of what happens behind the picture of these freeze.

[IIrik11]

i fukin knew meena was a fukin scammer all along

just kiddin :p

nice explanation and the unfreeze process as well above

here's to add something, indian police love the scare tactics

but if u know u haven't done anything wrong, don't worry

just hire a good lawyer who knows what he's doing and u'll be fine

[Bitcoin Smith]

here's to add something, indian police love the scare tactics

but if u know u haven't done anything wrong, don't worry

just hire a good lawyer who knows what he's doing and u'll be fine

Yes, police thinks they are above the laws especially when it comes to middle class people.

And hiring the lawyer is the way to proceed further if we want to deal with it but in this case the frozen amount is 5000INR means it is not worth to hire the lawyer to get that back because the fee will be much more expensive than 5000 rupees. Bank freeze is not a criminal offense so if we chose to skip that then there is no laws states that we can be arrested so nothing to worry but we will lose that 5000.

[IIrik11]

here's to add something, indian police love the scare tactics

but if u know u haven't done anything wrong, don't worry

just hire a good lawyer who knows what he's doing and u'll be fine

Yes, police thinks they are above the laws especially when it comes to middle class people.

And hiring the lawyer is the way to proceed further if we want to deal with it but in this case the frozen amount is 5000INR means it is not worth to hire the lawyer to get that back because the fee will be much more expensive than 5000 rupees. Bank freeze is not a criminal offense so if we chose to skip that then there is no laws states that we can be arrested so nothing to worry but we will lose that 5000.

i'd say it is worth it

even if u have to spend 15000 to get that 5000 unfreeze

because then u have won and are safe for future freeze

then u start trading freely bigger amounts paying taxes ofcourse

knowing that u can get out if something shitty like that happens again

..don't ya think?

[Bitcoin Smith]

~
i'd say it is worth it

even if u have to spend 15000 to get that 5000 unfreeze

because then u have won and are safe for future freeze

then u start trading freely bigger amounts paying taxes ofcourse

knowing that u can get out if something shitty like that happens again

..don't ya think?

But you missed an important point, you can't unfreeze that 5000 no matter what, but what you can do is to unfreeze the rest of your bank account assuming if there's any balance left in it. And that's what presented in other thread too, someone got lien for few hundred rupees but the account with 18lacs frozen completely so he managed to unfreeze the remaining balance and only the specific amount to be held until the investigation ends.

Paying taxes doesn't safeguard the p2p scams too, which is why everyone with the brain criticize the tax policy from FM that they collect 30% tax but providing nothing in return for it.