Crypto lender BlockFi mistakenly sent some users promotional rewards payments in bitcoin this month instead of U.S. dollars. Some of those users went ahead and withdrew the outsized rewards.
Now BlockFi is scrambling to pick up the pieces. “Our exposure currently is less than 200 BTC and the total incorrect withdrawal amount wasn’t much more than that,” BlockFi CEO Zac Prince told The Block. He did not specify exactly how much was withdrawn but said it was a “couple hundred BTC” from less than 100 clients.
More than half of those clients have already sent back BlockFi the inadvertently withdrawn funds, Prince said. He did not reveal the exact amount the firm has recovered.
It is also not clear exactly how many BlockFi users received bitcoin by mistake. According to social media posts, one user apparently received more than 700 BTC. Prince said that mistake “was fixed within hours.” And then “a tiny subset of clients who received the promo payouts were able to withdraw due to an edge case — which was caught quickly,” he said.
The promo payouts are apparently related to a March giveaway, in which qualifying customers were eligible for bitcoin rewards if they traded a certain volume during the period between March 18 and March 31.
Last week, however, BlockFi tweeted that some participants “may see an inaccurate bonus payment displayed in their transaction history.” The company added that it was “working on a fix and the proper amounts will be reflected shortly.”
Prince said BlockFi’s current exposure to potential loss is “well within range of loss reserves we hold for various purposes.” It is a “fraction of loss reserves we carry in equity,” he said. At current prices, the exposure amounts to about $7.5 million.
Some users have claimed on social media that BlockFi has threatened to begin legal action against them if they didn’t return the money. Prince said the company has not initiated any lawsuits, but that legal action is possible. BlockFi “will evaluate doing so on a case by case basis,” he said.
Prince said BlockFi’s operations are not affected by the situation, and that “all client funds are available as usual.”
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