BlockFi Accidentally Pays Users Bitcoin Worth Over $20M, Instead of $700

BlockFi, the cryptocurrency trading company, accidentally deposited Bitcoin worth tens of millions of dollars into users' accounts earlier this week, instead of USD stablecoin worth hundreds.

The company tried to reverse the payments, but not before some users inadvertently withdrew the Bitcoin funds.

The issue seems to have stemmed from a March promotion in which clients would receive bonuses paid in USD stablecoin. It appears that clients had been paid the amount in Bitcoin instead, with some receiving Bitcoin worth more than $20 million.

On May 14, BlockFi alerted its clients to the problem when it said on Twitter: "Some clients who participated in the March trading promotion may see an inaccurate bonus payment displayed in their transaction history. Our team is working on a fix and the proper amounts will be reflected shortly."

Now, BlockFi is trying to retrieve the funds that were mistakenly paid out and said in a statement posted to Reddit that: "fewer than 100 clients were incorrectly credited with cryptocurrency associated with a promotional payout that did not belong to them. BlockFi has contacted these clients and is working with them to rectify the issue."

One Reddit-user shared a screengrab of their bonus payment showing that they received 701.4 Bitcoin, which equates to more than $24 million US dollars at the time of writing. They said they believe they were owed around $700 USD and that the Bitcoin transaction had been reversed.

BlockFi legal action

CoinDesk reported that one BlockFi client believed that the large sum of Bitcoin they received was a reward for referring their friends, so they sent the funds to their cold storage wallet. Once the client realized it was an error, they requested to cancel the withdrawal and the BTC transaction reversal was confirmed in an email.

However, the Bitcoin funds ended up in the client's cold storage wallet and a day later, BlockFi called and emailed the client threatening legal action if they did not return the funds while also offering $1,000 USD stablecoin.

Additionally, the mistake has affected one BlockFi client who says they have been falsely accused of withdrawing the mistaken funds, as they claim they only withdrew USD stablecoin that they had deposited a month prior.

Reddit user rpfitzpatrick said on the BlockFi subreddit that two days after BlockFi made the mistake of releasing the funds—and after BlockFi reversed the Bitcoin payment—they withdrew the USD stablecoin that they had deposited a month ago, "completely unrelated to their claim."

The BlockFi client said that the crypto trading business has accused them of withdrawing funds that do not belong to them, saying "it's a fraud and a crime they will act on if not returned in the next two hours."

However, BlockFi assured its clients that the mistake should not impact other aspects of the business and said: "The situation does not affect any of BlockFi's ongoing operations and measures have been taken to ensure that an error like this will not be possible in the future. BlockFi's latest publicly reported AUM is $15B as of Q1 2021. Client funds are not impacted and are safeguarded."