Cryptocurrency Disputes: Frozen or Blocked Funds by a Platform
With the rapid expansion of the cryptocurrency market in Switzerland, a growing number of investors find themselves in situations where their funds are frozen or blocked by trading platforms. These measures, sometimes taken without prior warning, can immobilise considerable sums for indefinite periods. The Swiss legal framework offers effective remedies to contest such freezes and obtain restitution of assets.
Types of Freezes and Available Legal Remedies
| Cause of Freeze | Legitimacy | Main Remedies | Legal Basis |
|---|---|---|---|
| Prolonged KYC/AML procedure without outcome | Partially legitimate — but must be proportionate | Formal demand, interim measures | Art. 97 CO; art. 2 SCC |
| Judicial attachment (criminal authority) | Legitimate if valid judicial order | Appeal against the attachment order (art. 393 CPC) | Arts. 263 et seq. CPC |
| Unilateral account closure (general terms) | Contestable if abusive or contrary to good faith | Action for contract performance, damages | Arts. 97-109 CO; PILA art. 120 |
| Technical outage or prolonged breakdown | Not if the platform does not communicate and does not reimburse | Contractual action + damages claim | Art. 97 CO |
| Bankruptcy or illiquidity of the exchange | N/A — insolvency procedure | Restitution claim in bankruptcy (art. 242 DEBA); filing of claim | DEBA arts. 197 et seq.; DLT Act 2021 |
| Fraudulent freeze (exit scam) | Illegal | Criminal complaint + criminal attachment + civil action | Art. 146 SCC; art. 263 CPC |
Legitimate Grounds vs Abusive Freezes
Some freezes may be legally justified:
- Suspicion of money laundering or terrorist financing (AMLA)
- Unusual transactions requiring proportionate additional checks
- Attachment orders issued by judicial authorities (art. 263 CPC)
- Non-compliance with KYC identity verification procedures
By contrast, the following are contestable: prolonged freezes without communication of reasons, disproportionate requests for supporting documents, abusive account closures invoking vague violations of the general terms, and freezes motivated by undisclosed financial difficulties of the platform.
Legal Strategies to Unblock Funds
Pre-litigation Phase
Before initiating judicial proceedings, the recommended steps are:
- Building a file documenting all interactions with the platform
- Formal demand letter specifying the legal grounds for the challenge
- Report to FINMA if the platform is regulated in Switzerland
- Mediation proposal or amicable settlement
Emergency Court Proceedings
When the amicable phase fails, interim measures (arts. 261 et seq. CPC) are a powerful tool. The applicant must demonstrate:
- The likelihood of their right (contract, proof of funds)
- A loss that is difficult to repair (volatility, missed opportunities)
- The urgency of the situation
The action for contract performance (art. 97 CO) compels the platform to fulfil its contractual obligations, in particular allowing the user to freely dispose of their assets. The action for damages can complement these steps when the freeze has caused substantial financial losses.
Frequently Asked Questions about Frozen Crypto Funds in Switzerland
Can a platform freeze my cryptocurrencies indefinitely for KYC reasons?
No. If the freeze continues without clear communication of the reasons or without a regularisation pathway, it may constitute a breach of contract (art. 97 CO) or an abuse of rights (art. 2 SCC). The platform must comply with the principle of proportionality: KYC/AML checks must be completed within a reasonable time and requests for supporting documents must be specific and necessary. PBM Avocats can send a formal demand letter requiring the freeze to be lifted or seeking clear explanations.
What emergency measures can be obtained against a platform freezing funds in Switzerland?
Superprovision al measures (arts. 261 et seq. CPC) can be urgently sought before the competent civil court, without prior hearing of the platform if urgency is demonstrated. The applicant must establish the likelihood of their right, a loss that is difficult to repair and urgency. Such measures can compel the platform to release the assets subject to daily penalty payments. The procedure can result in a decision within a few weeks.
Does the bankruptcy of an exchange lead to the loss of my cryptocurrencies?
Not necessarily. The DLT Act of 2021 and Federal Supreme Court case law recognise that cryptocurrencies held by an exchange on behalf of its clients can be separated from the bankruptcy estate (art. 242 DEBA). If the platform maintained separate accounting for client assets, depositors may claim their holdings. The situation is more complex if funds have been commingled with the exchange's own assets.
What should I do if a foreign platform freezes my funds and no longer responds to requests?
Several simultaneous actions are recommended: (1) formal demand letter by registered mail to the official address, (2) report to the regulatory authority of the country of establishment, (3) criminal complaint in Switzerland for possible fraud (art. 146 SCC) if fraudulent freezing is suspected, (4) request for mediation before an arbitration chamber if an arbitration clause exists. PBM Avocats coordinates these steps in parallel.
Can I obtain damages for a funds freeze during a market rise?
Yes. If the freeze is wrongful, damages may include the value of the assets at the time of restitution less their value at the time of freezing, as well as documented lost investment opportunities. The high volatility of crypto assets complicates the calculation, but Swiss courts admit such losses on the basis of arts. 97-100 CO. Documentation is key: screenshots of prices, unexecuted orders, proof of missed opportunities.