Dirty BTC coins on the XMR market?

This both serves as a buyer beware and a need for advice.

TLDR: I sold XMR for BTC on bisq, transferred it to 2 different exchanges and both accounts independently got locked in the past 2 months.

Before I hear that I should stay away from exchanges, I know, I know already. It is only a small portion of what I own but I like doing high frequency small trades which is not possible on bisq at the moment due to the mining cost being more than the amounts I want to trade so it is a necessary evil.

The first exchange was poloniex, which out of the blue just stopped my withdrawals. When I opened tickets all they will tell me is that my trading “looks suspicious” and needs a person to approve it. They will give no information and are not asking me for any information but just keep giving me that empty response. It has been 60 days.

Second exchange is Bitfinex this week, they also stopped withdrawals and also all trading, and they too responded with a generic you look suspicious but they are now asking for KYC info, like way to much information kind of questions like tax forms, passports, all previous transactions, my owned addresses, and TXs from all wallets/exchanges and view keys from my monero wallets.

Surely looks like I’ve picked up tainted BTC from bisq. The 2 accounts are not linked to each other in any way and have never had coins transferred between them. I think this is very serious for the community. I have done 1000+ trades on bisq but I will never again if the coins I get are labeled as suspicious and are not able to be used and get investigated like this.

Also if anyone has advice on how to deal with the exchanges and if I should be bending to their every questions to get my coins back please PM me.

edit - also bisq is the only incoming source for both of these accounts

-I

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This post belongs in a Ploniex of Bitfinex forum.

Your musings on bitcoin fungibility is noted. Have a great day.

It is very bad that centralized exchanges can do this type of stuff.
Bitcoin fungibility is important to be preserved and these type of actions from centralized exchanges is what makes it harder for perfectly fair traders to not discriminate against normal and perfectly valid bitcoins.

Bisq will never be able to hold your funds hostage like this, due to it’s decentralized nature. It is worrying that immoral actions by centralized exchanges can make someone consider actually not using the only type of exchange that can not hurt you this same way.

It is ironic. Centralized exchanges bully their users to stay away from decentralized exchanges that can not bully them.

It is perfectly possible that this is the exact same reason why they are flagging your coins in the first place. There multisig transactions might make them figure out that you are a Bisq user, using the only fully open source decentralized exchange that they can not buyout or get government to close it down for them.

This might me against certain antitrust laws if they are dealing with their competition like this. Maybe even it would be a good idea to point this out to them, I don’t know. Maybe a lawsuit will worry them enough to release your funds.

PS: We should wait and see if some other Bisq users experience the same type of issues with centralized exchanges. I don’t use centralized exchanges myself, but I never had problems before with vendors accepting my BTC for payment.

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This post belongs here. I am not asking for you guys to fix the problem I am pointing out a very big problem that any of our bisq users will have if the use exchanges, and hopefully can save others the headache I now have to go through.

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I agree it is a terrible practice to do and it might work short time but it will eventually lead to their downfall. You can only rule with threats and bullying for so long before customers go elsewhere and something else better evolves to take its place such as Bisq.

Do you really think they could trace it transactions back to Bisq? The deposits should look the same as from any other non segwit wallet or am I mistaken? I somehow doubt that we pose enough of a threat to them to attack in this way.

And let us hope no others experience the same thing

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Well, the Bisq trading process leaves a huge fingerprint:

  • Funds go through a multisig address
  • Every deposit transaction has exactly one 32 byte OP_RETURN output and exactly one output to the multisig address receiving all inputs (minus fee)
  • The multisig address is funded by exactly two inputs
  • These inputs come from maker and taker fee transactions. With BTC trading fees, they can be identified as such pretty confidently by the amount and size of the outputs. If BSQ was used, it isn’t even a question whether it’s a Bisq transaction…
  • Same-fee taker, deposit and payout transactions
  • Taker fee and deposit transactions are broadcast at the same time

If you use all these, you can identify funds coming from Bisq payouts pretty confidently.
Whether they would take the effort to code this just to attack Bisq is another question, though…

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Wasabi Wallet or Joinmarket are the only solution atm to protect against chain analysis. As @a123b pointed out the on-chain trade protocol in Bisq makes it realtively easy to spot a Bisq trade if they would be starting to flag Bisq users (have not heard of anything like that). So if you want to use a centralized exchange and want to reduce risks use Wasabi. But CoinJoins might be also on their flag list, so might not help with all. Making about 7 follow up txs might help as that is usually the depth they go back. With currently high tx fees that might not be so cool as well (also assume they have smart enough algorithms to detect artifially for that purpose created txs).

What it is really about is the fight against cash. With cash you don’t need to care about the history of
your USD or EUR bill, otherwise paper money would have never emerged in the first place. Governments fight cash for various reasons and the cash-like property of Bitcoin is not what they like. Centralized exchanges are Banks and turn Bitcoin into Fiat. Starts when you deposit - you give BTC, they give you an IOU. And continues with fractional reserve behaviour like we see already with Bitfinex (only one known yet but can be assumed they are not the only one - bankers don’t let money sleep).

So if you use centralized exchanges you have signed up with Banks not with Bitcoin. Don’t be surprised to get treated as we are used to get treated from Banks (confiscating funds, betraying users, arrogance, financial suveillance, corruption with politics, insecurity, fractional reserve,…).

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Wow, didn’t even think how obvious it really is. Looking back in the history, both accounts got blocked within 1 week of making my first deposit there from a trade using BSQ (first being the week of the release of the DAO). Could be coincidence but let us hope they are not flagging us from this.

Thanks Manfred, I’m going to need some time for this to settle before coming back to bisq, but i will look into using wasabi wallet or maybe fees will calm down by then for making some intermediate hops to avoid this. This is one more reason bisq need to survive

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thanks for sharing. I’m moving away from poloniex now.

I’ve been trading XMR for BTC on bisq for 10 months now and never had any issues (yet).

Just being curious, did you withdraw your XMR to different wallets or have you been using the same wallet address all the time?

I’ve always withdrawn my XMR to the same wallet address since I’ve started and never used the exchange for anything else than depositing BTC and withdrawing XMR a minute later.

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This is one (among many) good advice of Andreas Antonopoulos that I remember:
he never let money on an exchange more than 5 minutes.

Always the same XMR address every time. Aside from keeping a bit on there in altcoins for a diverse portfolio, I used them the same as you, with the only transactions in/out from the account was btc in, xmr out 2 minutes later. There was no warning so one day the btc went in but the xmr was not allowed out (nor any other currency for that matter). Lucky I have xmr elsewhere so i could complete the Bisq trade. Ive been with them for almost 3 years now any this was the first ever issue, but yeah, its kinda a big one lol

Although very good advice, it would not have helped since they allowed deposits but not withdrawals, so you are done for the second it hits the exchange. He needs to update his stance: never trust an exchange, not even for a second.

Hello there.

You just maded me wonder if someone could build in a bitcoin mixer inside Bisq - since this is an exchange, enough imputs could be gathered.

This is the case way too often unfortunately. Sometimes they allow you to deposit, but for withdrawls ask for KYC.

I think there were some plans for it, but I assume that they were put away becuase of lack of Java developers.

That’s the worst part… those crooks have no problem letting you deposit and only fuck you over once they have you by the balls with your btc in their pocket.

I assume you were kyc’d on these places as well, right?

i can only think of two work arounds. 1- maybe next time sell the monero for bitcoin inside the centralized exchange? 2- Sell the bitcoins for fiat in bisq?

As for your situation of the exchanges… They are both overflooded with support tickets and with little to no interest to fix your situation, as they will get to keep your coins. I wish you luck with that but there are horror stories all over the internet about support tickets being responded after years, so i wouldnt keep my hopes up.

No, but I know a guy that had this happened to him.

I voluntarily KYC’d at polo when I opened the account 3 years ago to try and be transparent and not have these troubles.

I hope you got your funds out they just hit me hard again. Since I couldnt withdraw I put the funds to be lent out in their lending system …and they just announced that they are taking 15% from all lending accounts to cover their losses from some defaulted trades on CLAM. Can I not catch a break!

Update, finally got an answer from the exchanges Poloniex - " Your account was flagged for sending and/or receiving exposure to high-risk entities. As a result, the account has been frozen for trading and will be closed after two weeks." Bitfinex did not give explicit reasons but have also given me 5 days to close my account.