Freeze Assets + Smart Contracts


I was wondering what the behavior of the Freeze functionality would be like when dealing with a smart contract address. For example (hypothetically), if a customer was defrauded of an ASA and gets into contact with the asset issuer (who is in charge of the freeze address), but the fraudster has already transferred the balance into a smart contract address (e.g. a liquidity pool). Would issuing an asset freeze transaction freeze all the balance of that particular asset in that smart contract address?

Is there any other possibility to deal with a situation like this? (I don’t think it’s possible for the developer of the contract roll back that transaction nor track the balance as it goes through the smart contract; but maybe that’s possible or there’s a better way to handle this)

It really depends on how the smart contract is designed.

If it uses a single escrow account, then it would freeze the full escrow account.

If it uses an escrow account per user, then it would only freeze the user.

The smart contract may also have an emergency system to withdraw assets when such issue arises…

Thanks! Could you give an example of a commonly used emergency system? Do you mean like a multisig account where the freeze address has to authorize for the escrow to transfer the user’s balance?