P2P trader Diego Nunes, owner of GlobalMoney Trading, has been trading cryptocurrencies at LocalBitcoins — a startup that connects bitcoin buyers and sellers — since early 2016. In April of this year, however, his account was closed. The platform, based in Helsinki, Finland, sent only two emails in a row informing them that the wallet should be emptied. Reason? The profile had transferred or received BTC from prohibited wallets, websites or platforms. “There is no further explanation as to what these addresses, platforms or websites would be. We used our website wallet also to ship to customers who bought with us directly, so we always sent to the addresses that customers asked for, without knowing which system, platform or website these addresses belonged to", said the entrepreneur to Bitcoin Portal. Nunes, who runs Global alongside businesswoman Carolina Andrade, said he tried to recover the account, but there was no solution. “We send messages on Reddit, Facebook, Instagram and also through the website's support ticket system. They only responded through the ticket system and repeated the previous message, saying that the account was closed and that we should withdraw the bitcoins”, he said. The entrepreneur said that he has already traded 100 bitcoins a month on the platform, generating up to R$ 100,000 in commission income for the startup.
Like Nunes, other Brazilians also had accounts closed in the last two months. The justification used was the same: the person/company sent or received digital assets to suspicious addresses. The cryptocurrency BtcX Exchange House account, created in 2015, was deleted in May. Terezinha Irany Mariano de Medeiro, owner of the company, said that the blockade occurred soon after a negotiation. “I made a sale of R$400 to a client via WhatsApp and when I sent it to the wallet informed by him, LocalBitcoins informed that the wallet is on a blacklist. I told the customer this, he gave me another address, but when I tried to send it again, the account was blocked”. Terezinha said that she sent all the screenshots of the negotiation to the platform, informing that she had also been a victim, as she did not know there was a blacklisted wallet: “But it was the same as talking to a machine. They didn't take anything into account. And the worst thing is that I was marked as fraudulent”. The businesswoman also said that the situation affected the business. “LocalBitcoins was our main source of income and represented 80% of the deals. Now we are having serious difficulties in honoring our commitments and continuing our work."
The report asked LocalBitcoins why the Brazilians' accounts were closed. In a statement, the company said that 35,000 new Brazilian users have registered on the platform since 2020 and that, within this group, there are few reports of blocked or banned accounts. Numbers were not given. The company also said that blocking and banning are usually caused by the platform's automatic alerts. "The system in question generates alerts based on, for example, fraudulent activity, transactions to or from illegal sources such as dark markets, or simply a lack of information about high-volume transactions." The startup also reported that in its term of service there is a section entitled, “Limiting access to your LocalBitcoins wallet” that clearly describes the possible reasons for the limitations imposed on the accounts. “It's important to keep in mind that we are essentially a financial service and, of course, we must take the security of our platform and our customers very seriously. We have a zero tolerance policy for illicit activities and our strong belief in security means that at times our users may need to go through verification processes or provide clarification on high-volume transactions.” “Whatever the case, once an account is blocked or banned, our Customer Support team will be ready and happy to look into the matter. They are able to provide users with more information and/or instructions on how to potentially regain access to their account”. According to the Usefultulips tool, in the first 10 days of June, around R$1.7 million in bitcoin were traded in reais on LocalBitcoins.