How a Trust Wallet Swap Led to a Coinbase Account Closure ($52K Nightmare)
This story comes from a Reddit post on the r/trustwalletcommunity forum. One user shared his very difficult experience when his Coinbase account was closed after he made a swap on Trust Wallet. In this article, we will explain what happened step by step and offer tips to help you avoid similar problems. We will also include advice given by other community members in the discussion.
Coinbase closed my account with $52k in due to alleged money laundering from Ethereum I received in a Trustwallet swap
byu/Economy_Purchase_285 intrustwalletcommunity
What Happened?
About eight weeks ago, a Reddit user made a swap using Trust Wallet. In this swap, he received over $50,000 worth of Ethereum (ETH). He then transferred the Ethereum to his personal Coinbase account. With a plan to hold the ETH for a long time, he even made a bank withdrawal of $8,500. However, the next day, when he was checking his bank, he found something very wrong.
- See also: Frustrating Experience with Coinbase’s CNY Rewards (Reddit)
Instead of the money he needed, he received an email from Coinbase with a shocking message. The email read something like this:
“Thank you for your interest in Coinbase. Our primary goal is to make digital currency safe and secure for our customers. Coinbase is a regulated Money Services Business under FinCEN (FinCEN.gov), and as part of achieving this goal, we are legally obligated to implement regulatory compliance mechanisms.Upon careful review, we believe your account has engaged in prohibited use in violation of our Terms of Service and we regret to inform you that we can no longer provide you with access to our service. We respectfully request that you follow the on-screen instructions presented when you sign in to your Coinbase account to send any remaining balance offsite to an external address.”
This email meant that Coinbase had closed his account. He was not allowed to use it anymore and was told to send his remaining balance to an external wallet. When he tried to withdraw his Ethereum, he kept getting error messages such as “Transaction failed error unknown – please contact support.”
He soon learned that there was an anti-money laundering (AML) concern about his account. Coinbase claimed that the Ethereum he deposited came from a chain of addresses that was involved in financial crime. A few days later, he found the website of the partner that Coinbase uses. That website showed that the Ethereum came from a wallet that was already blacklisted.
He was very upset and confused. He wondered: How could Trust Wallet allow a swap that would send ETH from a blacklisted wallet? Why was his money stuck? He also felt scared because he has a wife and a baby who is almost one year old. He needed the money, especially during hard times. Now, he was also worried that he might get in trouble with the authorities.
The Main Points of the Story
Let us look at the details of his experience:
- The Swap on Trust Wallet:
The user did a swap in Trust Wallet and received over $50,000 in Ethereum. Trust Wallet is a non-KYC (Know Your Customer) app. This means that it does not check who you are when you use it. While this might be fine for many, it can sometimes mean that the app does not check if the source of the funds is clean. - Transfer to Coinbase:
After the swap, he moved the Ethereum to his Coinbase account. Coinbase is a well-known exchange that follows strict rules and checks to make sure that the money is not used for illegal purposes. - Withdrawal Issue:
After withdrawing $8,500 to his bank, he expected to get more money soon. Instead, he got an email saying his account was closed. When he tried to withdraw the rest of his ETH, he saw an error message every time he tried. - Reason Given by Coinbase:
According to Coinbase, the deposit of Ethereum triggered an anti-money laundering alert. The explanation was that the chain of addresses (the path the money traveled on the blockchain) was linked to financial crime. The Ethereum came from a wallet that was on a blacklist. - Impact on His Life:
This problem was not just about money. The user mentioned that he has a family—a wife and a baby—and that he needed this money as a backup during hard times. The closure of his account and the error in withdrawing funds meant that he could not use the money when he needed it most. - Trust Wallet’s Role:
The user questioned how Trust Wallet allowed this swap. He felt that Trust Wallet did not do enough to monitor transactions. In contrast, Coinbase has many measures in place to check for illegal activity. This raised a serious concern about how safe it is to swap large amounts on Trust Wallet without proper checks. - The Ongoing Investigation:
Coinbase was not only closing his account, but they also mentioned that his account was being investigated by the authorities. This made him worry that his own actions, even though he had done nothing wrong, might be seen as shady or illegal.
What the Community Said
After the original post, several people commented with advice and opinions. Let’s look at what they said:
1. Call Coinbase for Help
One user, Infamous_Hat_8698, gave very practical advice. They said that the best thing to do is to call Coinbase directly. Here is what they suggested in simple language:
- Talk on the Phone:
Instead of sending emails, call Coinbase’s support. Phone calls might help you get a clear answer. - Ask Specific Questions:
Ask them if your funds are being held because of any information from the authorities. The advice was to find out if any government agency is involved. If no authority is involved, they should let you withdraw your money. - Explain Your Situation:
Tell them that you transferred the Ethereum from your own Trust Wallet. Explain clearly that you did not do anything illegal.
2. Ask for More Details
Another user, MrNotSoRight, asked for more information. They wondered:
- Who is the “partner” Coinbase mentioned?
- What exactly did the partner’s website state about the blacklisted wallet?
- What does “blacklisted wallet” really mean in this case?
This comment shows that sometimes the messages from an exchange or a partner are vague. It is important to ask for clear details when such an issue arises.
3. The Importance of Self-Custody
A well-known piece of advice in the crypto world is: “Not your keys, not your crypto.” This is what Me-and-only-for-me said in one of the comments. The idea is simple:
- Do Not Keep Money in an Exchange:
When you keep your crypto on an exchange, you do not have full control. The exchange can block you or even take your money if they suspect any problem. - Use a Personal Wallet:
It is safer to store your crypto in a personal wallet where you control the private keys.
4. Converting Crypto to Cash
Another comment by EstablishmentReal156 discussed how to get cash from crypto. They noted:
- Need for Fiat Money:
If you need money for daily expenses, you must convert your crypto into cash. - Cold Wallet Issue:
Even if you hold your crypto in a personal (cold) wallet, you might face problems when sending it to an exchange to sell. - Alternate Methods:
Some people suggest using unregulated exchanges. However, that comes with its own risks because there are many scams in the crypto world.
Later on, Me-and-only-for-me added:
- P2P Marketplaces or Gift Cards:
The best way to sell crypto without facing these blockages might be to use peer-to-peer (P2P) marketplaces like Paxful or to buy gift cards. This method might be safer in the sense that you will not get blocked by the usual anti-money laundering measures.
5. Keep Your Money Safe
Lastly, snowdwarf1969 also stressed:
- Use a Self-Custody Wallet:
Instead of keeping money on exchanges like Coinbase, always use a wallet where you are the only one in control. - Be Careful with Exchanges:
Exchanges can block your account at any time. If you keep money there, you might suddenly lose access to it without warning.
Important Tips for Crypto Users
Based on the story and the community advice, here are some tips for anyone using crypto wallets and exchanges:
Tip 1: Always Use a Self-Custody Wallet
- What It Means:
A self-custody wallet is one where you hold the private keys. This gives you complete control over your crypto. - Why It’s Important:
If you keep your funds in an exchange, you are trusting the exchange to follow all the rules. If they suspect anything, they might freeze your account. By using a wallet like Trust Wallet, Cake Wallet, or any other self-custody wallet, you are in full control of your funds. - Real-Life Example:
In our story, the user’s funds were caught in a situation where Coinbase closed his account. If he had kept his funds in a personal wallet without moving them to Coinbase, he might have had more control over his money.
Tip 2: Know the Source of Your Funds
- Be Cautious with Swaps:
When you swap crypto on platforms like Trust Wallet, make sure you understand where the money is coming from. Sometimes, the funds may have passed through wallets that have a bad history. - Investigate Blacklisted Addresses:
If you hear that your funds came from a “blacklisted wallet,” ask for more details. A blacklisted wallet means that the wallet has been reported or flagged for being involved in illegal activity. It is important to know this before you transfer large sums of money. - Double Check the Transaction History:
Use blockchain explorers to check the history of the wallet that sent you the funds. This extra step might help you catch issues before they become a problem.
Tip 3: Contact Support by Phone
- Why Call Instead of Email:
Written messages can sometimes be vague or slow to respond. A phone call is more direct and might help you get immediate answers. - What to Ask:
When you call, ask them very clearly why your account is frozen or closed. Ask if there is any government intervention or if it is just their policy. Ask for details about the “partner” and the “blacklisted wallet.” - Keep a Record:
Note down the names of the people you speak to and what they say. This record can be helpful if you need to escalate the issue later.
Tip 4: Consider Alternative Ways to Convert Crypto
- Peer-to-Peer Marketplaces:
If you run into trouble when trying to convert your crypto on exchanges, consider using a peer-to-peer marketplace like Paxful. This allows you to sell crypto directly to another person. - Gift Cards:
Another method is to buy gift cards with your crypto. This can be a way to use your crypto without the risk of having your account blocked. - Research Before You Sell:
Look for platforms that do not have strict anti-money laundering controls that might block your transactions. However, remember that unregulated platforms carry their own risks. Always do your research before using them.
Tip 5: Understand the Risks of Using Non-KYC Apps
- What is Non-KYC:
Non-KYC apps, like Trust Wallet, do not ask you for personal identification. This can make them more private but also less secure in terms of following legal rules. - Potential Risks:
If you use a non-KYC wallet and then transfer money to a strict exchange like Coinbase, the exchange might flag your transaction. The lack of KYC in one part of the process might cause trouble in another. - Balance Privacy and Security:
Think carefully about the trade-offs between privacy and safety. For large sums of money, it might be safer to use wallets and exchanges that perform proper checks on the source of funds.
What Does This Mean for Everyday Crypto Users?
The story from the Reddit thread is a wake-up call. It shows that even if you are careful, you might run into problems if you do not fully understand the journey of your funds. Here are some thoughts for anyone in the crypto community:
- Do Not Assume Everything Is Safe:
Just because you use a popular app like Trust Wallet does not mean your money is safe. You must always look at the details of your transactions. - Read the Fine Print:
Always read the terms of service for any app or exchange you use. There may be hidden risks that are not clear at first. - Keep Up with Community Advice:
Online communities like r/trustwalletcommunity and r/CoinBase have many experienced users. Their advice can help you avoid pitfalls. - Plan for the Worst:
Think ahead about what you would do if your funds were suddenly locked up. It may be wise to have a backup plan, like knowing alternative ways to convert or transfer funds. - Be Ready to Act Quickly:
If you see any unusual behavior or if you receive unexpected messages (like the email from Coinbase), act fast. Contact support immediately and ask for help.
Lessons Learned from the Story
Here are the key lessons from this unfortunate experience:
- Always Do Your Homework:
Before making any large transactions or swaps, research the platforms you are using. Check if there have been any similar issues reported by other users. - Use Multiple Wallets if Needed:
If you are dealing with a large amount of money, do not keep it all in one place. Use a combination of self-custody wallets and regulated exchanges. This can reduce the risk of losing all your funds if one service has issues. - Keep Your Funds in Your Control:
The advice “Not your keys, not your crypto” is very popular for a reason. Always try to keep your private keys safe and avoid leaving large amounts of money in an exchange for a long time. - Don’t Delay When You Face a Problem:
When our Reddit user saw that he could not withdraw his funds and received a warning email, he immediately started asking questions and looking for help. If you face a similar issue, do not wait. Contact support, ask your questions, and try to understand what went wrong. - Learn from the Community:
Many of the comments in the Reddit thread provided useful tips. Use these lessons to better protect your funds. The advice to call support instead of emailing and the recommendation to use alternative ways of converting crypto are very practical.
Final Thoughts
The story of the Coinbase account closure due to a Trust Wallet swap is a reminder of how complex the world of cryptocurrency can be. It shows that even when you follow what seems to be normal procedures, there can be hidden risks. The incident is not only about losing access to money—it also affects people’s lives. When families depend on those funds, every delay or error can create serious stress and financial problems.
If you are new to cryptocurrency or even if you have been involved for a while, keep these lessons in mind. Always try to understand every step of your transactions. Use secure wallets where you control the keys, and do not leave large sums in exchanges for too long. In case you need to use an exchange, research and choose one that is reliable and has good customer support. And if anything unexpected happens, act quickly—preferably by calling support directly to get clear answers.
It is also important to understand that anti-money laundering rules are meant to protect everyone from real financial crime. But sometimes, these rules can cause problems for honest people. That is why it is very important to know the path your funds take. Sometimes, the money you receive might have passed through many wallets before it gets to you. And if even one of those wallets has been involved in any illegal activity, your funds might be at risk of being frozen or lost.
By learning from stories like this, you can better plan your transactions. Use trusted platforms, double-check every detail, and keep up with the advice from experienced users in online communities. Remember that the crypto space is full of both opportunities and risks. With careful planning and a little extra attention to detail, you can enjoy the benefits of cryptocurrency while keeping your money safe.
Summary of Key Points and Tips
- The Incident: A user did a swap on Trust Wallet and received over $50k in ETH. After transferring it to Coinbase, his account was closed because the funds came from a blacklisted wallet.
- The Problem: Coinbase cited anti-money laundering rules and warned that the funds were connected to a chain of addresses linked to financial crime.
- The Impact: The user is now without access to his funds. With a family to support, this has created a lot of stress and uncertainty.
- Advice from the Community:
- Call Support: Always try to speak directly to Coinbase support by phone to get clear answers.
- Ask for Details: If you receive a vague explanation (like “partner” or “blacklisted wallet”), ask for more specifics.
- Control Your Funds: Do not leave large sums in exchanges; keep them in wallets where you have the keys.
- Alternate Conversion Methods: Consider using P2P marketplaces or even buying gift cards to use your crypto if traditional exchanges block your transactions.
- Be Careful with Non-KYC Apps: Understand that apps like Trust Wallet may not do enough to check where the funds come from. This can later cause problems when moving money to a more regulated platform.
This story and the advice shared by the community should serve as an important lesson for everyone involved in the cryptocurrency space. Always stay informed and be cautious about every transaction you make.
Conclusion
The experience of having a Coinbase account closed over a Trust Wallet swap is a tough lesson. It shows us that even simple transactions can have hidden complications. The key takeaway is to always be aware of the risks and to take steps that keep your money under your control. Use trusted methods, ask questions when something is unclear, and never hesitate to seek help from both customer support and your crypto community.
By following these simple steps, you can help protect yourself from similar issues. Keep learning, stay cautious, and remember that in the fast-moving world of crypto, it pays to be prepared.
This is the full story from the Reddit post and the advice given by community members. We hope these lessons help you make better decisions in your crypto journey. Stay safe and always keep control of your funds!
