Crypto Exchange Freeze Demand Letters

Coinbase, Binance, Kraken, and other exchanges holding your crypto hostage without explanation.

Crypto exchanges freeze accounts with alarming frequency, citing "suspicious activity," "compliance review," or simply providing no explanation at all. Your funds can be locked for months while support tickets go unanswered.

Critical distinction: If your account was frozen due to a law enforcement subpoena or court order, the exchange may be legally prohibited from releasing funds or even telling you why. A demand letter won't help - you need a criminal defense attorney.

Common Freeze Scenarios

Scenario Exchange's Position Your Situation
KYC/AML Hold "Additional verification required" You've submitted documents but get no response
Suspicious Activity "Account under review" Normal trading flagged by algorithm
Source of Funds "Cannot verify fund origin" Legitimate funds from mining, early adoption, or transfers
Geographic Restriction "Services not available in your jurisdiction" Policy changed after you opened account
Indefinite "Review" No specific reason given Account locked, support unresponsive for months

Why Crypto Freezes Are Different

Legal Framework

Your Rights as a Customer

State Money Transmitter Licensing

Most exchanges are licensed as money transmitters in states where they operate. This creates regulatory leverage:

Regulatory complaint: Filing a complaint with the exchange's licensing regulator often gets faster results than a lawsuit. Exchanges don't want to risk their licenses over individual customer disputes.

Challenges

Potential Damages

Evidence Checklist

Account registration details and verification documents submitted

All KYC/AML documents you provided (passport, utility bills, bank statements)

Transaction history showing fund sources

Screenshots of account balances (with timestamps)

All support tickets and responses (or lack thereof)

Email notifications about the freeze

User Agreement / Terms of Service (version at signup)

Evidence of legitimate fund sources (mining records, other exchange records, bank transfers)

Market prices at freeze date vs. current (if claiming market losses)

Any specific compliance requests and your responses

Strategic Approach

Step 1: Exhaust Internal Channels

Step 2: Regulatory Pressure

Step 3: Legal Demand

Step 4: Arbitration or Court

Timing matters: Crypto markets are volatile. A 6-month freeze could mean significant losses. Document market prices at freeze date and regularly thereafter to support damages claims.

Demand Letter Templates

Initial Demand - Account Frozen Without Explanation

"I am writing regarding the freeze of my [Exchange] account ([account email/ID]) which has been inaccessible since [date]. My account contains approximately: - [X] BTC (valued at approximately $[amount] at freeze date) - [X] ETH (valued at approximately $[amount] at freeze date) - $[amount] USD - [Other holdings] Total value at freeze: approximately $[total] Despite multiple support tickets (Ticket #[numbers]) and document submissions, I have received no substantive explanation for the freeze and no timeline for resolution. I have been a verified customer since [date]. My funds originated from [legitimate sources - other exchanges, bank transfers, mining, etc.]. I have provided all requested KYC/AML documentation including [list documents]. Your continued detention of my property constitutes: 1. Conversion under California law 2. Breach of the User Agreement, Section [X] 3. Potential violations of money transmitter licensing requirements I demand: 1. Immediate release of my funds, OR 2. Specific written explanation of the compliance concern, with an opportunity to address it If this matter is not resolved within 14 days, I will: - File a formal complaint with [DFPI/NYDFS/relevant regulator] - Initiate arbitration as provided in the User Agreement - Pursue all available legal remedies Please confirm receipt and provide a substantive response to [email]."

Source of Funds Demand

"Your [date] correspondence requested documentation regarding the source of funds in my [Exchange] account. I am providing the following documentation: 1. Bitcoin holdings: [Explain source] - Purchased on [other exchange] between [dates] - transaction records attached - Mined between [dates] using [mining pool] - pool payout records attached - Transferred from hardware wallet on [date] - blockchain transaction ID: [txid] 2. Ethereum holdings: [Explain source] - [Similar documentation] 3. Fiat deposits: [Explain source] - Bank wire from [bank name] on [dates] - bank statements attached - Total deposited: $[amount] All funds in my account derive from legitimate sources. I have no connection to any sanctioned entities, darknet markets, or illicit activity. If you require additional documentation, please specify exactly what is needed. Generic requests for "more information" are unacceptable when I have already provided [X] documents. I expect my account to be restored within 7 business days of confirming receipt of this documentation. Continued detention after receiving satisfactory source-of-funds documentation would constitute bad faith and conversion of my property."

Regulatory Complaint Notice

"This letter serves as formal notice that I have filed complaints with the following regulatory agencies regarding [Exchange]'s continued detention of my funds: 1. [State] Department of Financial Protection and Innovation - Complaint #[number] 2. Consumer Financial Protection Bureau - Complaint #[number] 3. [State] Attorney General Consumer Protection Division - Complaint #[number] [Exchange] holds a money transmitter license in [State], License #[number]. The arbitrary and indefinite freeze of customer funds without explanation violates the obligations attendant to that license. My account containing approximately $[amount] in cryptocurrency and fiat currency has been frozen since [date] - a period of [X] months. Despite providing all requested documentation and submitting [X] support tickets, I have received no substantive response. This conduct demonstrates: - Failure to maintain adequate customer service procedures - Potential violations of money transmission regulations - Unfair and deceptive business practices I demand the immediate release of my funds or, alternatively, a detailed written explanation with a specific resolution timeline within 10 business days. Failure to respond will result in supplemental filings with regulators and initiation of arbitration."

Pre-Arbitration Demand

"DEMAND PRIOR TO ARBITRATION Pursuant to Section [X] of the [Exchange] User Agreement, which requires good-faith attempts to resolve disputes before arbitration, this letter constitutes my formal pre-arbitration demand. Dispute Summary: - Account frozen since: [date] - Account balance at freeze: $[amount] - Current market value: $[amount] - Market loss during freeze: $[amount] - Duration of freeze: [X] months Demands: 1. Immediate release of all cryptocurrency and fiat balances 2. Compensation for market losses: $[amount] 3. Interest on frozen fiat balances: $[amount] If this dispute is not resolved within 30 days, I will initiate arbitration with [AAA/JAMS] as specified in Section [X] of the User Agreement. I will seek: - Return of all account balances - Market loss damages - Arbitration fees and costs - Attorney's fees to the extent permitted The arbitration filing fee is $[amount]. [Exchange]'s share of arbitrator fees will likely exceed the cost of simply releasing my funds. I urge you to resolve this matter now. Please direct all responses to [attorney name and contact] / [my email address]."

Building a Trading Platform or Crypto Exchange?

Check out my Trading Technology Legal Hub for guides on MTL licensing, FinCEN registration, and regulatory compliance.

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Crypto Exchange Froze Your Account?

I help individuals recover funds from crypto exchanges, neobanks, and payment processors. Here's what I can do for you:

  • Draft and send a formal demand letter on attorney letterhead via certified mail and email
  • Prepare regulatory complaints to state financial regulators (DFPI, NYDFS, etc.)
  • Navigate arbitration clauses and evaluate your legal options
  • Negotiate directly with exchange legal/compliance teams
Typical cost: ~$450 for demand letter drafting and certified mail delivery, including initial follow-up negotiations. Extended negotiations or arbitration prep billed at ~$240/hour.

Schedule a Consultation

Book a paid consultation to discuss your situation.

Email: owner@terms.law

Why Do Crypto Exchanges Freeze Accounts?

Cryptocurrency exchanges like Coinbase, Kraken, and Binance.US frequently freeze customer accounts for "compliance review," "suspicious activity," or vague "terms of service violations." These freezes can last months, leaving you unable to access your own digital assets. While exchanges cite regulatory requirements, many freezes appear arbitrary and disproportionate.

Common Crypto Account Issues

Your Rights and Remedies

While crypto is less regulated than traditional finance, you still have legal options. State money transmission laws may require exchanges to release funds within specific timeframes. Breach of contract claims can be pursued if the exchange violates its own terms. Some states have consumer protection laws that apply to crypto platforms. A formal demand letter often triggers faster resolution than support tickets.

Escalation Options