A lesson / warning on exchanges, KYC and sudden account closures

We’ve all seen the posts – “exchange abc why did you close my account for no reason?” I’ve always wondered why. “They have violated the ToS the exchange might say. But we never actually know. I learned a little bit of insight today and I thought it was important to share. Not going to name anyone here.

A friend of mine was moving some BTC last night. You know the drill. Small test transfer. The anxiety of sending the larger amount post test. He mentioned the test went through but his larger one did not. Terrifying.

He got a call this morning from the exchange. Asking a bunch of questions – where are you sending the coins was one. He didn’t feel he needed to be sharing that. His coins and really none of their business.

Shortly after, he got the email. “Your account has been closed”.

Here is the kicker and his saving grace. He personally knows the CEO of the exchange. Immediately texts him and gets on a call. First of all, his account was fixed asap. Excellent. But here is the interesting part. They (and I assume all exchanges) have a point system, you get enough red flags (kinda like spam filters) and they punt you. He explained that he did just enough to trigger that. Also said that they have to be careful because on the flip side – they get sued frequently when people actually get ripped off – so there is some self preservation going on there.

He called me to both freak out and vent shortly after this all went down.

So, if you use an exchange, you gotta play ball. They have reasons for asking these questions and if you don’t agree with them asking, play nice. Keep your mouth shut and get your coins out. Yes it sucks. But having your coins liquidated and forced to cash out sucks more.

Play along, get your coins out, find a new exchange. Realistically though, any legit exchange is going to have the same questions and you’ll likely have the same issues.

Unless you know the exchange CEO. Then you’re good.

Hopefully this is helpful to someone.