Warning! Did you use FTX, Bittrex, KuCoin, Mexc, or any crypto exchange that shut down in the U.S.? Crypto Exchanges May Freeze Your Accounts when you try to Cash Out!
Crypto exchanges like Coinbase often freeze accounts to comply with anti-money laundering (AML) and Know Your Customer (KYC) regulations. If you attempt to cash out a large amount from a wallet or another exchange, the platform may freeze your account until you provide proof of the source of funds. This is especially common after major exchange shutdowns (e.g., FTX, Bittrex, KuCoin) or when moving funds across multiple platforms.
Example of a Flagged Transaction
A typical flagged scenario:
- Chase Bank → FTX → Ledger Wallet → Coinbase (to cash out)
If you try to cash out via Coinbase, they may freeze your account and ask for documentation tracing the entire money trail. You’ll need to show:
- Bank statements from Chase proving the initial deposit to FTX.
- Screenshots or records from FTX showing deposits and transfers to your Ledger wallet (including wallet addresses).
- If FTX records are unavailable, create a spreadsheet detailing deposits, conversions, and wallet addresses for each transaction.
Essential Documentation to Keep
To avoid delays or complications, always maintain:
- Bank statements for all fiat deposits to exchanges.
- Screenshots or exportable records of all crypto transactions (including wallet addresses and dates).
- A spreadsheet or table listing every transaction, including dates, amounts, and wallet addresses.
- Proof of identity and any KYC documents used to open exchange accounts.
Why Documentation Matters
Most banks retain statements for 5–7 years, but crypto exchanges may require proof of transactions from much earlier. Since the timing of a “wealth transfer” is unpredictable, save all documentation as soon as possible. This is especially important if you used non-standard IDs (e.g., Palau ID) to open accounts on European exchanges, as you may need to explain the entire flow of funds when cashing out.
We might as well get a second job as an accountant lol
haha, yes. for those that do a lot of trading and transferring, this could become a nightmare. there are some services that help with this like cointracker, coinly, etc. you connect your wallet addresses and exchanges to them and they will track all your transactions. one problem is cointracker is the official app for coinbase. so who knows what kind of data cointracker might share with the government. next thing you know government starts mining cointracker data to see what wallets every person owns, and find those hidden unreported wallets.