Why OTC Trades Trigger an Account Freeze

Over-the-counter (OTC) cryptocurrency trading is common for investors who want to move large amounts of digital assets outside public exchanges. Unfortunately, OTC trades are also one of the reasons why legitimate accounts sometimes get flagged, frozen, or pulled into a criminal investigation.

An OTC trade happens when two parties exchange cryptocurrency directly or through a broker, rather than posting the trade on a public exchange like Binance, Coinbase, or Kraken. These trades are attractive because large amounts can be exchanged without moving the market price, especially when the parties may not want their trade to appear on a public order book. Brokers or OTC desks can arrange deals quickly.

While perfectly legal, OTC transactions often lack transparency compared to regular exchange trades. For this reason, exchanges and law enforcement agencies pay extra attention when they see wallets linked to OTC activity.

Attorney for OTC Cryptocurency Trades Triggering a Freeze

At Sammis Law Firm, we represent clients across Florida and throughout the United States whose wallets, exchange accounts, or stablecoins have been frozen after an OTC trade. If your account was frozen and you were asked to contact a law enforcement agency in the United States, we can help you understand why it happened and fight to get your assets released.

If you were pulled into a criminal investigation with a federal agency like DEA, FBI, or USSS, we can investigate the blockchain tracing reports used against you and challenge the reliability of the government’s data to highlight gaps in the tracing process. We can help you gather information showing a lawful sources of funds through contracts, receipts, and transaction histories.

Most importantly, our crypto asset forfeiture attornes can communicate directly with law enforcement and exchange compliance officers to push for the release of your assets.

Call 813-250-0500.

Why OTC Transactions Raise Red Flags

Exchanges and investigators rely on blockchain analysis companies to identify “high-risk” activity. OTC trades often set off alerts because they may involve large transfers of USDT, Bitcoin, or ETH with no clear source of funds. Since transactions might involve unverified counterparties, it increases the odds the funds might be involved in fraud or money laundering.

Mixing of clean and tainted assets in the same liquidity pools can spread suspicion to innocent wallets. If even a fraction of funds handled by an OTC desk are linked to hacks, scams, or sanctioned entities, then every wallet that traded through the same channel can be flagged.

Law enforcement agencies don’t need to prove you did anything wrong before freezing your account. Instead, they rely on blockchain tracing software. If your USDT, ETH, or other tokens cross paths with tainted coins, your account could be frozen automatically.

Consider this common scenario. A scammer moves stolen crypto through several wallets before moving it to an OTC desk. The OTC desk pools those funds with yours before sending them to an exchange. The exchange receives a compliance alert, and your account is frozen. This scenario shows how innocent account holders can be swept into a criminal investigation.

Exchanges like Binance and Coinbase use automated compliance filters. Those filters might be triggered by deposits or withdrawals flagged by blockchain intelligence companies or a link to wallets tagged “high-risk.” If so, the platform may freeze the account while demanding documentation. Unfortunately, most clients only learn about these risks after their funds are already locked.

FAQs – OTC Trades and Frozen Crypto Accounts

Why do OTC crypto trades look suspicious?

OTC (over-the-counter) trades often happen outside of regulated exchanges, with less transparency about who is on the other side of the trade. Because of that, exchanges and law enforcement may treat them as “high risk” and flag accounts that send or receive funds from OTC brokers.

Can an innocent person’s account get frozen?

Yes. If your wallet interacts with an OTC desk that also handles stolen or “tainted” funds, your assets can be flagged even if you did nothing wrong. Many innocent traders are swept up in investigations simply because of how blockchain tracing tools cluster transactions.

What does it mean if my USDT or ETH is “tainted”?

“Tainted” assets are coins that passed through wallets linked to scams, hacks, or sanctioned entities. Even a small connection can cause exchanges like Binance or Coinbase to freeze accounts until the issue is investigated.

How long can my account stay frozen?

It varies. Sometimes compliance reviews last weeks or months. If law enforcement is involved, your assets may remain frozen until you respond to an investigation or file a claim. By retaining an experienced attorney, you might get through the process much quicker.

This article was last updated on Friday, September 12, 2025.