Asked to Pay Tax to Withdraw Crypto? It's a Scam

How withdrawal fee and tax scams work

This is the final stage of most fake investment platform scams. When you ask to withdraw, the site or its 'support' team says you owe taxes, a withdrawal fee, a 'verification deposit', or a penalty for suspicious activity. Some claim a regulator has frozen the account and needs payment to release it. Each payment is followed by a new demand. Regulators describe this as advance-fee fraud: you pay upfront and receive nothing.

Warning signs of a withdrawal fee scam

You must send new money before you can take any money out.
The fee cannot simply be subtracted from your displayed balance.
Claims that your account is frozen for 'money laundering', 'arbitrage', or a regulator investigation.
Demands for a 'tax' paid to the platform rather than handled through your own tax filing.
New fees appear each time you pay the previous one.
Support only communicates through chat apps or the platform's own chat window.
Threats that your balance will be lost unless you pay quickly.
A 'mistaken deposit' into your account that you are told to repay.

How to avoid withdrawal fee scams

Treat any request to pay before withdrawing as proof the platform is fake.
Before investing, test that the platform is a known, regulated business, not a link someone sent you.
Do not send more money to 'prove' ownership, liquidity, or identity.
Contact regulators such as the SEC, CFTC, or your state securities office directly if a platform claims they froze your account.
Ask someone you trust to review the situation before paying anything.

Already paid a fee to withdraw? What to do now

Stop paying. Additional payments almost never lead to a withdrawal.
Preserve evidence before anything disappears: screenshots of chats, profiles, websites and app screens, plus receipts, emails, and a written timeline. Do not delete conversations or the app.
Contact the exchange, crypto ATM operator, bank, or wallet provider you used right away. Ask them to flag the receiving address or account and to freeze funds if they can. Tell them the account was used in an investment scam.
Report it to the FBI at ic3.gov and to the FTC at reportfraud.ftc.gov, even if the amount is small. Include wallet addresses, transaction IDs (hashes), amounts, dates, and every website, app, username, and phone number involved. See /guidance/report-crypto-theft-fbi-ic3. You can also report investment fraud to the SEC (sec.gov/tcr) or CFTC.
Watch for recovery scams. Anyone who contacts you offering to get your crypto back for an upfront fee, or who claims to work with the FBI or IC3, is likely a scammer. IC3 says it will never ask for payment to recover lost funds or refer you to a company that does. See /guidance/can-stolen-crypto-be-traced.

Withdrawal fees and taxes: common questions

Can a crypto platform make me pay taxes before I withdraw?

No legitimate platform works that way. Real platforms take their fees out of your balance, and taxes on any gains go through your own tax return, not to the platform. A demand for new money before you can take any out is proof the platform is fake.

I paid the fee and now there’s another one. Will paying this last one release my money?

No. Each payment is followed by a new demand, and none of them leads to a withdrawal. The balance you see was never real. Stop paying.

The platform says a regulator froze my account and I must pay to release it. Is that possible?

No. The FBI says “the US Government does not request payment for law enforcement services provided” (PSA250813). If a platform claims the SEC, the CFTC or your state regulator is involved, contact that regulator directly using details from its own website.

Can I deduct the loss on my taxes?

Possibly, if you put the money in hoping to make a profit. In a 2025 memo (CCA 202511015), IRS lawyers concluded that victims in several scam examples could deduct their losses as theft losses because the money was handed over for profit, but a romance-scam victim with no profit motive could not. The memo isn’t binding precedent and your facts matter, so talk to a tax professional. More: crypto scam losses and taxes.

Withdrawal fee scam statistics

IC3 received 61,559 cryptocurrency investment fraud complaints with $7.228 billion in reported losses in 2025; the FBI notes victims are charged 'taxes and fees' when they try to withdraw. (source)

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This guide is general information, not legal or financial advice. ChainWatch is not a law firm and does not guarantee fund recovery.

Sources

The information on this page was checked against the sources listed in September 2026. Laws, agency guidance, company policies and contact details change, so please verify the current information with the original source before you act.