If you're reading this article, you've likely had one of your crypto accounts frozen by a crypto exchange like Binance or Gate.io.

Whether due to risk management protocols or technicalities in the terms of use, we recently received plenty of "the crypto exchange froze my account for reasons I don’t understand." Messages from users all across the globe, which inspired us to write this article and tell you this:

If you're dealing with this issue, you’re not alone, and there are steps that you can take to address frozen crypto accounts.

So, are you ready to learn more about how to take concrete steps, including arbitration, to recover your funds? 

Alright, then — let's get into it!

Can a Crypto Wallet Be Frozen? 

First things first, let's address a common question, which is: Can a crypto wallet be frozen legally? 

While it's commonly believed that cryptocurrency is decentralized and beyond control, your crypto wallet can, indeed, be legitimately frozen.

(However, not in the same sense as a traditional bank account.)

You see, if your crypto is stored on a centralized exchange like Binance or Gate.io, the exchange can suspend your account or wallet under certain conditions.

This is due to the fact that when you open an account with these exchanges, you agree to their terms of use, which often include clauses that give them the right to suspend or restrict access to your account under their risk management policies.

For instance, in the case of Binance, their terms of use explicitly allow them to suspend accounts for various reasons, including “confidential criteria that are essential to our risk management and security protocols.”

This often leaves users in the dark, wondering why their funds are frozen and what steps to take next.

Why Do Crypto Exchanges Freeze Accounts?

Like we've mentioned earlier, crypto exchanges may freeze accounts for several reasons, but they are mostly linked to either: 

• Compliance with Regulations
• Internal Risk Management Protocols
• Suspected fraudulent activities.

Let's explore each of these reasons a bit further:

Compliance with Regulations

When it comes to regulatory compliance, exchanges must adhere to different (and uneven!) financial regulations depending on the jurisdiction.

This can lead to account freezes—even if the user is not subject to those regulations.

Suspected fraudulent activities.

If the exchange detects unusual activity that could be related to fraud, it may suspend the account as part of its anti-money laundering (AML) and Know Your Customer (KYC) policies.

While this is a valid security measure, the problem arises when exchanges freeze accounts over minor irregularities or without concrete proof of fraud or money laundering.

Internal Risk Management Protocols

In some cases, exchanges act preemptively to avoid penalties or rely on vague, confidential risk criteria, leaving users confused and in the dark. 

For instance, this was the case when users from countries like the UK, Canada, and certain EU nations found their Binance accounts frozen after facing increased regulatory scrutiny from financial authorities in those regions.

Security Concerns

Lastly, your crypto account may be frozen due to security concerns as part of the exchange's risk management strategy. 

This is done to prevent potentially harmful activities from causing further damage, but it is often accompanied by unreasonable investigation periods that can drag on for months—or even years—without resolution.

And that's where things get tricky.

While freezing accounts to investigate suspicious activity or protect against security threats may seem justified, the lack of clear timelines for these investigations creates a serious problem for crypto owners.

The question that arises is: What exactly counts as a “reasonably long” investigation?

While we’d argue that hitting the one-year mark is already unjustified due to the significant impact it has on users' access to their funds, most exchanges do not provide specific guidelines on what constitutes a reasonable timeframe for these investigations.

Instead, they often rely on vague terms in their terms of use, which state that they can freeze accounts for as long as necessary to conduct their inquiries. (And let’s be honest, how many of us actually read those terms of use?)

This lack of transparency leaves users in a state of uncertainty, unable to plan for their financial needs or understand when they might regain access to their assets.

In cases like this, arbitration becomes one of the only options for users to reclaim their funds.

What to Do if Your Crypto Exchange Froze Your Account?

The first and most obvious step would be to contact customer support, which we assume you've already done since you're reading this article.

If this informal method fails, your best bet would be to gather all the documentation that may help your case if you decide to pursue legal action — including all communications, transactions, records, and your exchange's terms of use — and then escalate the matter by hiring a lawyer with experience in crypto dispute resolution.

Now, the question is: Do you really need to hire a lawyer when your crypto accounts get frozen?

And the answer is: 

If your frozen assets are substantial, legal representation is certainly highly recommended. Especially since exchanges like Binance are known to make procedural arguments to dismiss claims.

On the other hand, if you have a smaller amount at stake, self-representation could be an option, but beware of the risks. Even small procedural missteps can lead to your case being dismissed.

Exchange Claims: Filing Arbitration for Frozen Crypto Funds

Filing a claim against a crypto exchange can be tricky because most exchanges include arbitration clauses in their terms of use, meaning disputes must be resolved through arbitration rather than traditional courts. 

If that's the case for you too, go and check the arbitration clause in your exchange's terms of use first to identify things like where to sue crypto exchange and within which statute of limitations.

For example, Binance disputes are typically handled through the Hong Kong International Arbitration Centre (HKIAC), while Gate.io disputes go through the Panama Concilitation and Arbitration Centre (Cecap).

Note: These jurisdictions are often chosen to make legal action more difficult, lasting, and expensive for users, which is why many exchanges hope users will drop their claims due to the costs involved. For example, in the case of arbitration in Hong Kong, if the value of your dispute is $200,000, you would pay equally significant attorney fees if represented by a Hong Kong attorney. What's even worse is that not all of your expenses may be recoverable, even if you win your case.

Cryptocurrency Lawyer

If you find yourself in a situation where a crypto exchange has frozen your account, it’s essential to understand your rights and the legal options available to you.

Consulting a cryptocurrency lawyer can guide you through the intricacies of arbitration and the challenges posed by disputes with exchanges. If you have any questions or need further assistance, don’t hesitate to reach out for support.