When the Crypto Exchange is Judge and Jury

Users with Blocked Accounts Turning to MyChargeBack for Help

By Evan Spicer 

Director of Cryptocurrency Investigations

Crypto exchanges have been operating in an unregulated shadow world for years, able to do largely what they wanted with little recourse to any authorities in the event anything went wrong. And just as governments started to take the threat to their citizens’ financial security seriously and hold the exchanges to account, those very exchanges responded by making the lives of their customers even more difficult. Those same customers have begun turning to MyChargeBack for help in regaining access to their money.

Bitcoin appeared on the scene in 2009, revolutionizing the worlds of finance, investment and technology in one fell swoop. The world’s first cryptocurrency, bitcoin’s promise was to decentralize and democratize stores of value. Ostensibly immune to government control and artificial devaluation and inflation, and with scarcity hard-wired into its digital DNA, bitcoin certainly caught the attention of many investors.

Of course bitcoin did not remain alone on the scene for very long. It was quickly joined by Litecoin, Ripple, Dogecoin, Monero, Ether/Ethereum, Bitcoin Cash, and literally thousands of others. Most have crashed and burned, and even the ones that have stuck around for the long haul have been infamous for their wildly erratic and volatile value fluctuations.

In no time cryptocurrency exchanges appeared, creating a space in which people could convert their fiat (national) currency for crypto, and vice versa. Binance is the biggest such exchange in the world, whereas Coinbase and Kraken are among the biggest and most popular in the United States.

Crypto Under Attack

After years of “benign neglect,” the world’s governments and financial regulators have begun paying very close attention to cryptocurrencies in general and crypto exchanges in particular. No longer would they be able to operate under the radar, playing by their own rules with total disregard of international norms of financial conduct. At least that was the idea.

MyChargeBack for its part has been in the forefront of calling for more robust regulation of the cryptocurrency industry.

The United States banned Binance from operating there in 2019. Not wanting to lose out on such a lucrative market, Binance created a fully regulated subsidiary just for the U.S., but even that is banned in seven states, including some of the biggest.

The government of China, in this regard, was actually ahead of the curve when it effectively banned all cryptocurrency business on its soil way back in 2017. Among the results of that decision was that Binance, which was originally a Chinese company, had to find a new place to call home. It first went to Japan before being exiled yet again, finally finding its current home in the Cayman Islands, a major international financial tax haven.

In June of 2021, after months of speculation, the Financial Conduct Authority (FCA), the UK financial regulator, banned Binance from selling any regulated financial services in that country, and forced them to post a warning for all visitors from the UK to its website.

Crypto Fights Back, with Collateral Damage

Throughout 2021 (and even stretching as far back as late 2020) reports started rolling in about customers with active accounts at the major exchanges finding that their accounts were frozen. Being locked out, they were unable to access their money, or even see the status or balance of their accounts. These events were a source of significant financial difficulty, as well as emotional turmoil, to thousands of innocent private individuals.

In the case of Binance, the troubles began for its American (and other) account holders in late 2020, and have continued into September 2021 at the very least. Many of these individuals had no history, warning, or even suspicion of illegal activity on their accounts. They were simply locked out with no explanation whatsoever.

Another wave of worldwide Binance account lockouts happened between May and July 2021, due apparently to a crash in bitcoin price. Some customers were unable to access their accounts for literally months. Customers of Coinbase, another major crypto exchange, experienced the same problem for probably the same reason in January 2021.

In June, 2021, apparently in response to The FCA’s actions, numerous UK citizens, as well as others around the world who held Binance accounts in pounds sterling, found themselves unable to make any deposits or withdrawals.

In some cases, this was happening ostensibly due to the customer being located in a country that was outlawing (or threatening to do so) that particular exchange, or the industry as a whole. So, lots of American, Chinese, and British customers were locked out.

Was this the exchanges’ way of “getting back” at the countries that were damaging their business model? Was it simple callous disregard for the needs and rights of their customer base, perceiving them to be largely faceless and interchangeable? Or were the exchanges even trying to — perhaps — get ahead of the curve by showing themselves to be extra-vigilant and cautious with the money of customers in the jurisdictions that were about to regulate them? Kind of like a shortcut to their notoriously lax compliance with KYC (know your customer) and AML (anti money laundering) requirements? Good luck finding an answer, because the exchanges have been rather tight-lipped about it.

In other cases, there appeared to be no rhyme or reason regarding the cause of the lockout. Quite often there was not even anyone to talk to, much less file a formal complaint. The exchanges are in effect acting as judge and jury, exercising total power over their accounts, and offering no remedy to those who have been wronged.

MyChargeBack Offers Crypto Solutions

It comes as little surprise, therefore, that these customers have been streaming to MyChargeBack looking for help. Among our new clients in recent months suffering from locked accounts and frozen funds are customers of the major international cryptocurrency exchanges Kraken, Bitstamp, and Coinbase.

It is only natural that MyChargeBack should become the destination of choice for such people. We are, after all, at the forefront of seeking out novel strategies and methodologies in the tracing and retrieval of cryptocurrency-related payment and account disputes. When seeking out strategies is insufficient, we develop technologies and best practices from scratch in order to always stay one step ahead of our clients’ needs.