What actually happens when exchanges freeze wallets?

[Z-tight]

Overall, it's unfortunate that risk assessment, AML scoring, and similar practices have somewhat become acceptable, even here it seems. For me, they're a Trojan horse. The real purpose is control.

Yeah it is, i also consider it to be an attack on BTC's fungibility. When you introduce terms like 'clean' and 'dirty' BTC, then it is obvious what the motive actually is, because to bitcoiners, there is neither clean nor dirty BTC. BTC is BTC. However, i guess that is where we are right now with regulations, and things are probably bound to get worse. Developers are even getting jailed for creating open source, self custodial softwares, it is that crazy.

[NotATether]

The exchange does not really assess the risk itself. It's the compliance tools they use that does that for them.

Here's a example from ChainAnlysis software to give you an idea:

https://www.chainalysis.com/product/kyt/
https://www.chainalysis.com/solution/crypto-compliance/

So as you can see above, these solutions would easily tell them (in real time) if the transaction is coming from a high risk non KYC exchange, a mixer, a darknet marketplace, a gambling site, connected to terrorist groups, etc.

It's then up to the exchange to decide what to do (investigate it further assigning a compliance officer to your case and asking you for more details, let it go, decide to no longer serve you but let you withdraw, etc.)

BitMixList can do that at a fraction of the price 🙂

https://bitmixlist.org/aml-check.html

[Findingnemo]

In worst case scenario, they do it to themselves, which means they will just stop all the withdrawals when there is hack or an attempt to investigate further but usually they do that when they suspect that you are trading with the funds that is related to illegal activities and then exchange will freeze then ask for the source of funds.

[davis196]

In many cases the confusing part is not the freeze itself, but what actually happens after it starts — how exchanges assess risk, what triggers deeper investigations, and why responses can take so long.

1.How exchanges access risk? There's no risk for the crypto exchange. You have to elaborate more on what do you mean by "how exchanges access risk". The risk is for the users only. Imagine having crypto blocked in your account while the crypto prices crash and you can't sell your crypto at a higher price, because your account is frozen.
2.Suspicious transactions are what triggers deeper investigations. The forum members have already mentioned all the potential suspicious transactions. I don't want to get into detail about this, it's self-explanatory.
3.Responses take too long because most crypto exchanges don't have big enough customer support teams or big enough investigation teams.

[hugeblack]

A few months back Binance had frozen my account. First of all, they suspect incoming transactions, then flag my account. Most probably they have some tools to detect suspicious transactions; when their system flags an account, then they move forward for manual review. It's about transaction issues; they might freeze the account for some other reasons as well, like security issues or legal issues.

The funny thing is, instead of freezing the transaction, they freeze the entire account, meaning they close the whole account and request information related to a single transaction.
Therefore, even frozen accounts aren't handed over to the authorities; instead, they become "part of their hot wallet."

[UmerIdrees]

This is a very important topic to discuss, as it is very common nowadays and can happen to anyone at any time. Your funds are frozen, and you are left only with the silence, the silence of your approach to the exchange, where there is no clear answer from them and no idea of what to do. This is the worst thing about it.

I am glad, and I thank you for sharing this link here. I am sure a lot of users will benefit from it. This is very necessary for everyone, as even if they haven't faced any such issues, they may need it in the future so that they have a clear picture of what to do and how to get back their funds..

Well, to the OP's question about what happens when the exchange freezes the wallet, well, if he is talking about the money in that wallet, then that becomes the custody of the exchange in case they never unfreeze the account and keep the money with themselves forever. That is another way of scamming people, and therefore, one should be selective and careful in depositing money in centralised places, including exchanges or any service providers.

[Cookdata]

Well, to the OP's question about what happens when the exchange freezes the wallet, well, if he is talking about the money in that wallet, then that becomes the custody of the exchange in case they never unfreeze the account and keep the money with themselves forever. That is another way of scamming people, and therefore, one should be selective and careful in depositing money in centralised places, including exchanges or any service providers.

Not for one day an exchange wallet is a personal custody, just because they allowed you to freely use the wallet without any prior warnings or quick note doesn't make it a good one.
I don't have problem when people used centralized exchanges but making an exchange as place of storage kills everything about Bitcoin or any coin you decide to keep on the exchange, there are plenty ways to have coins under your custody, way cheap and more secure than when you allowed everything on another third party custody.

There was a time Binance was locking funds due to geographical concern. I remembered one time when Isreal and Palestine where into one or two disagreement, I don't know what happened then but Binance began to froze Palestinian Binance for no reason and they had to even respond to the allegation to be truth. Like it's the confidence for me. If you have funds on any exchange, don't let it sleep over on the exchange, withdraw your coins before you sleep.

[EarnOnVictor]

-snip-
Curious to hear if others here have seen similar cases recently.

This is not an isolated issue, as it's popular and people are being victims daily. The painful part is the false flag, an unnecessary pains giving to customers in the name of automated tool functions. They deliberately made these systems stricter and delay intervention because they do not care. These guys are mostly fighting for their pockets, and not for sanitation, just as they hide under regulation.

[joniboini]

The painful part is the false flag, an unnecessary pains giving to customers in the name of automated tool functions. They deliberately made these systems stricter and delay intervention because they do not care.

I was a victim of one of these. I remember my withdrawal got stuck for a few days, in another case not processed for weeks because their tool failed to recognize that I use my own accounts because I use a different name or something. Luckily, they didn't freeze my wallet, so I can transfer and withdraw it on other exchanges just fine. It's so weird because I remember I had no issue and made no changes before that point. It doesn't help that their app quality has gotten worse, too.

[lovesmayfamilis]

Yes, I also think I wrote something similar yesterday in one of the topics. Any exchange user can be temporarily blocked, or rather, their funds, having shown, as they say, suspicious activity unusual for the owner. My story also includes freezing and a bunch of questions about who, what, and from, without understanding the very essence of the answers. They seem to need an answer, but whether it's true or not is not really important. I had this, and so they called a consultant, but without understanding their misunderstanding, in my opinion, they returned the funds to me, and with this, I stopped all contacts with that exchange.

It seems that when interacting with exchanges, we always walk on thin ice, each time risking falling out of favor for thousands of small and insignificant reasons that they usually cannot explain correctly.

[joniboini]

They seem to need an answer, but whether it's true or not is not really important. I had this, and so they called a consultant, but without understanding their misunderstanding, in my opinion, they returned the funds to me, and with this, I stopped all contacts with that exchange.

So the consultant just told them to return all your funds regardless of your answer? That's quite weird. It's surprising to hear they explain how they solve your issue, though. Usually, it's just a one-sided analysis and judgment. At best, they'll call their upper management and do what they told. On the other hand, needing a consultant to process a basic query about a fund source is a bit much imo.

[tabas]

The topic is good, but OP never came back for this thread he's made. It's only about posting his webinar and probably thought of some people to join them for free. Anyway, it's still a good topic to be discussed and the thread could continue on its own because it can also serve as an informative thread to anyone from the forum and guests that might come here. A lot of thoughts and experiences have been shared on this thread and if he can put the common things into a list and concatenate it might be a good read especially to the newbies.

[virasog]

In worst case scenario, they do it to themselves, which means they will just stop all the withdrawals when there is hack or an attempt to investigate further but usually they do that when they suspect that you are trading with the funds that is related to illegal activities and then exchange will freeze then ask for the source of funds.

In case of a hack of an exchange, it's very rare that an exchange may let you withdraw and in case of a big hack, your money is never refunded. For the other scenario where your account is frozen because of any investigation, you will only get refunds if the exchange is legit and has no intentions of scamming people otherwise, the scam exchange can just use any excuse to block your account and forfeit your funds.

[Findingnemo]

In worst case scenario, they do it to themselves, which means they will just stop all the withdrawals when there is hack or an attempt to investigate further but usually they do that when they suspect that you are trading with the funds that is related to illegal activities and then exchange will freeze then ask for the source of funds.

In case of a hack of an exchange, it's very rare that an exchange may let you withdraw and in case of a big hack, your money is never refunded. For the other scenario where your account is frozen because of any investigation, you will only get refunds if the exchange is legit and has no intentions of scamming people otherwise, the scam exchange can just use any excuse to block your account and forfeit your funds.

A legitimate exchange won't do that unless they have probable cause or received an order from the tax/government agencies to do that. But those are for the people who are involved in some kind of shady activites and some people can even get caught unknowingly that is why the user need to make sure they are complying with all the terms of exchange that is when they can question if the exchange blocks the funds.

[nc50lc]

This webinar is focused on the legalities? The resource persons are therefore lawyers?

The additional Telegram link once a user register for the webinar did hint "Lawyer" but I didn't go past there even though I've accessed his link on a sandboxed environment.
I bet 0% of the users who replied here actually watched OP's webinar (registered or not), if not, about 1%.

@OP Since you're probably affiliated with the website, not just a link you stumbled upon since there's a reference link attached to it:
It would be best if it didn't require to register just to watch/listen, that alone stopped some of those who are slightly/actually interested in it.