08 Mar 2020 · 4 min read

‘Crypto-Friendly Bank’ Blocked Your Money? Good Luck Recovering It

“There is little that a customer can achieve by resorting to legal action to force the bank to release those funds." “Seek to work with them to help them conclude their process as soon as possible.”

Source: iStock/SensorSpot

Sooner or later, you may be blocked out of your bank account. It can happen to any of us, and it can even happen with supposedly crypto-friendly “banks,” such as Bitwala, Revolut, and more.

The question is: what should you do if such a company freezes or blocks your account? Well, according to lawyers, there isn't any legal 'magic bullet' you can use that will successfully get your account reopened.

Still, at the very least, you can seek to contact and cooperate with your company as fully as possible, assuming that they've frozen your account in order to carry out KYC (know your customer) or AML (anti-money laundering) checks. And in a worst-case scenario, you can always contact the financial regulator of the country where you and the bank are located.

Desperate clients

Complaints from people being locked out of their bank accounts are surprisingly common. Basically, if you tend to dabble in cryptocurrency trading or crypto-related business, and if you use a bank that accepts your custom as a 'crypto person,' you seem to be at greater risk of having your account blocked or frozen.

For example, the Berlin-based crypto startup Bitwala that provides German bank (solarisBank) accounts, is also being criticized for account-blocking on Reddit. Here's Reddit user "pibyk" writing on the Bitwala sub-Reddit a couple of months ago:

"I consider myself to be sort of lucky as my account got blocked for no valid reason before I put anything in it. So there is nothing to recover and no hassle to get the money back. The message I got was meaningless, and their customer service failed to respond in any reasonable time. As far as I am concerned this action constitutes a serious breach of trust, so I am no longer interested in such an unreliable service."

This kind of problem isn't exclusive to Bitwala. Another reportedly 'crypto-friendly' bank – the UK-based Revolut – has also received a number of Reddit complaints, including this one:

"All my money is locked in my revolut account, I can’t even buy a bottle of water because i got no cash on me and these jerks are ignoring me for no reason. Please help me get in touch with them, I’m desperate."

In other words, the problem is a general one, and similar complaints can be found for Wirex, Barclays, ING, Fidor, and Simple Bank, among others.

‘The quickest and cheapest strategy’

Legally, what can a customer do if their account is frozen by their bank? In terms of taking specific legal actions, the disappointing answer to this question is: nothing.

"Clearly, any answer is case specific and depends on where the bank and customer are based," says James Kaufmann, a lawyer specialized in blockchain and cryptocurrency at Howard Kennedy. "But in a general context, as I see it, if a bank blocks an account because it feels it is appropriate to carry out further AML/KYC checks (and bear in mind that source of funds and wealth are things that need to be considered here), there is little that a customer can achieve effectively and reasonably by resorting to legal action to force the bank to release those funds."

Still, Kaufmann advises that customers take the practical step of contacting their bank wherever possible and of cooperating with them to get the account back online.

"In my experience, the better course of action is to find a friendly and engaged contact at the relevant bank and seek to work with them to help them conclude their process as soon as possible," he tells Cryptonews.com. "This is usually the quickest, cheapest and most effective strategy. Legal action will be time-consuming, costly, labor intensive and there is limited likelihood of success unless the bank is wilfully refusing to release funds or not following a reasonable and appropriate procedure."

But yes, assuming that the bank is wilfully refusing to release funds and has no legal grounds for doing so, then legal action may very well be viable. Felix Shipkevich is a lawyer with Shipkevich in New York, and he tells Cryptonews.com that contacting the regulator is your best bet.

"If the cryptocurrency exchange is regulated, customers who are unable to withdraw their funds should immediately contact the regulator where their account is papered," he says.

Given that banks are also regulated, much the same applies if your bank is preventing you from withdrawing your money.

But Shipkevich adds, if the company is not regulated, “then contacting law enforcement authorities should be the next best action. Unfortunately, civil legal actions may not be successful, particularly if prosecuting and enforcing judgments are likely to be challenging."

It almost goes without saying, but it's never a good idea to deal with an unregulated bank, so it's unlikely that most people will ever find themselves in such a situation. Still, contacting the relevant financial regulator and asking for advice, in cases where your bank is being consistently unhelpful, is usually a good idea.

And in the end, even if you end up having your account unfrozen, it also might be a good idea to switch banks. Assuming that you can find one with a better reputation for treating customers who deal with cryptocurrency more fairly. In the meantime, let’s hope that hyperbitcoinization will arrive sooner than expected, removing all middlemen who can control your money.