Crypto Disputes Unpacked: An Interview with a Cryptocurrency Lawyer on Exchange Conflicts, Legal Remedies, and Industry Challenges

Tubrazy Shahid
6 hours ago
5 min read

Interviewer (INT):Thanks for joining us today. Let’s jump right in. We hear more and more about disputes involving cryptocurrency exchanges—both between users and exchanges, and even between exchanges themselves. Why is this such a growing issue?

Crypto Lawyer (CL):Thanks for having me. The growth of disputes in the crypto space is a direct reflection of the industry’s explosive expansion, lack of standardization, and at times, regulatory fragmentation. As more people engage with digital assets, the number of failed transactions, frozen funds, hacked wallets, insolvency cases, and unauthorized delistings has also risen.

We're not just seeing users complain about poor service or downtime anymore. We're seeing millions in contested funds, cross-border lawsuits, and even cases of deliberate market manipulation between platforms.

Section 1: Customer vs. Crypto Exchange

INT:What are the most common disputes you're seeing between individual users and crypto exchanges?

CL:Great question. These generally fall into five categories:

Frozen Accounts or WithdrawalsExchanges suspend user accounts for KYC/AML checks or “suspicious activity” but don’t provide a clear path to resolution. Sometimes, users lose access for months—or permanently.
Lost or Misallocated FundsThis includes situations where crypto is sent to the wrong wallet, or funds vanish during transfer due to technical issues. The user is often blamed, even when platform error is the cause.
Unauthorized LiquidationsOn margin or futures platforms, we often see forced liquidations that occur outside normal price movements—sometimes due to API glitches or poor liquidity management.
Listing/Delisting DisputesProjects or investors complain when exchanges delist tokens without notice, often crashing the price and leaving holders with worthless assets.
Security Breaches & HacksEven when an exchange is hacked, they may deny liability or refuse to refund users—citing disclaimers in their terms of use.

INT:Are these disputes even winnable for users? The terms and conditions always seem stacked in the exchange’s favor.

CL:That’s partially true. Most exchanges have highly protective boilerplate user agreements, and they often limit their liability dramatically.

However, all contracts are subject to fairness doctrines, especially in consumer protection jurisdictions like the EU, UK, or some U.S. states. If we can prove negligence—say, poor security practices, or failure to follow their own internal policies—a civil claim or regulatory complaint can be successful.

Section 2: Exchange vs. Exchange Disputes

INT:Interesting. And what about exchange-to-exchange disputes? Is that a real thing?

CL:Absolutely. While less visible, disputes between crypto exchanges are very real and sometimes quite hostile. These usually occur in the following forms:

Liquidity Sharing Gone WrongSmaller exchanges often partner with larger platforms for liquidity provision. Disputes arise when order books are manipulated, spreads are artificially widened, or when one side fails to fulfill trade settlements.
Token Custody or Listing RightsExchanges sometimes argue over who has the exclusive listing rights to certain assets—especially after token founders make conflicting deals.
Copy-Trading & Front-Running AllegationsOne platform may accuse another of copying their trades or accessing market data without permission, especially if they’re routing orders through APIs or off-chain settlement layers.
Exchange Hopping Post-InsolvencyIn FTX’s aftermath, for example, many counterparties accused others of withholding funds, misreporting liabilities, or engaging in post-bankruptcy asset shielding.
Regulatory DisclosuresExchanges sometimes share information with regulators or governments that implicate competitors, especially in regions with unclear rules. This results in backdoor retaliation and disputes involving compliance teams and lawyers.

INT:Are these usually resolved privately or through court?

CL:Initially, they’re handled behind closed doors—through arbitration, mediation, or private settlement. Public court cases between exchanges are rare but increasing, especially in jurisdictions like Hong Kong, Singapore, the UK, and the U.S., where crypto platforms are increasingly registering corporate entities and seeking legal recognition.

Section 3: Regulatory Disputes & Enforcement

INT:How do regulators factor into these disputes?

CL:They’re becoming central actors. We're seeing a wave of enforcement actions, administrative orders, and compliance disputes between exchanges and regulators:

SEC lawsuits (e.g., Coinbase, Binance, Kraken)
AML enforcement from FinCEN, FCA, MAS, and EU regulators
Sanctions violations involving Russian or North Korean crypto entities
Consumer protection probes, like the FCA’s bans on certain promotions or trading products

Sometimes, an exchange preemptively sues the regulator (as Coinbase did with the SEC). Other times, they settle, but disputes over licensing, product classification, KYC obligations, and cross-border jurisdiction are frequent.

Section 4: Legal Remedies for All Parties

INT:So what remedies are available—for both retail victims and institutional players?

CL:Several options exist:

Internal Dispute Resolution: Most exchanges offer a tiered complaint process. Often ineffective but a required first step.
Regulatory Complaints: Filing with bodies like the SEC, FCA, BaFin, or consumer ombudsmen can apply pressure and sometimes lead to recovery.
Civil Lawsuits: If jurisdiction allows and damages are substantial, users can sue for negligence, breach of contract, or fraud.
Crypto Arbitration: Specialized crypto arbitration forums are emerging (e.g., WIPO for NFTs, JAMS with crypto panels). These are faster and more private than courts.
Asset Tracing & Recovery: In fraud or insolvency cases, lawyers often work with blockchain forensics firms to trace stolen or misappropriated assets, then file claims for recovery via receivership or litigation.

Section 5: Advice for Users and Industry

INT:Any final advice for people using exchanges or building in this space?

CL:For users:

Avoid storing large amounts on centralized exchanges. Self-custody is safer if done right.
Take screenshots and download statements regularly. Exchanges can erase histories.
Read the terms of use, especially around withdrawals, KYC, and dispute resolution.

For builders and exchanges:

Get your compliance architecture right early. Fixing it later is expensive and dangerous.
Be transparent in your dispute resolution process. A trusted platform doesn’t hide when things go wrong.
Treat disputes as opportunities to show integrity and differentiate from the competition.

INT:Thanks so much for this comprehensive breakdown. This conversation has been eye-opening.

CL:My pleasure. The crypto legal space is rapidly evolving, and so are the rights and remedies available to all parties. Whether you're a user, a developer, or an exchange executive—disputes are inevitable. How you prepare for and resolve them will define your reputation in this industry.

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Disclaimer

The information provided in this article is for general informational purposes only and does not constitute legal or financial advice.

Author & Crypto Consultant

Shahid Jamal Tubrazy (Crypto & Fintech Law Consultant)

Shahid Jamal Tubrazy, a certified top expert in Crypto Law from Duke University, is a leading authority in the cryptocurrency and blockchain space. As a seasoned Fintech lawyer, he offers a full spectrum of services, including licensing, legal guidance for ICOs, STOs, DeFi, and DAOs, as well as specialized expertise in crypto mediation, negotiation, and mergers and acquisitions. With a proven track record and published works on Blockchain Regulation and Cryptocurrency Laws, Shahid provides unparalleled insights into the complexities of the fintech world, ensuring compliance and strategic success. 🌐💼 #CryptoLaw #Fintech #Blockchain #LicenseServices #CryptoMediator #MergersAndAcquisitions #CryptoCompliance #FrozenAssetsrecovery.