Some BlockFi users received free Bitcoin by mistake. Now, the crypto exchange wants it back.
A promotional giveaway turned into an embarrassing and potentially expensive gaffe for BlockFi. The cryptocurrency exchange mistakenly deposited millions of dollars worth of Bitcoin to a small number of user accounts. It's currently trying to recover those funds.
It all stems from a trading promo that BlockFi ran from March 18 through March 31. Eligible users would receive a bonus on the crypto they traded during that time period. According to the terms, users would receive their bonuses by May 31. But due to a payment error, some of them got much bigger bonuses than expected.
BlockFi's accidental Bitcoin payments
The trouble started on May 14, when BlockFi tweeted that some participants may see inaccurate bonus payments. Although it said that the issue would be corrected shortly, that didn't happen.
On May 17, BlockFi credited some of its users with Bitcoin that didn't belong to them and wasn't part of the promotion. Zac Prince, BlockFi's CEO, said in a tweet that the company sent out "a couple hundred" Bitcoin total to fewer than 100 of its users.
Considering the cryptocurrency's price, that's a significant amount. It's trading at about $38,000 at the time of writing this article, even with Bitcoin plummeting after a China bank crackdown. If BlockFi sent out 300 Bitcoin, that's $11.4 million at the current price.
Although that isn't good news for BlockFi, it's not going to lead to bankruptcy, either. To put things in perspective, BlockFi had $15 billion in assets under management as of the first quarter of 2021. Prince clarified in his tweet that the amount at risk is a fraction of the Bitcoin it owns and its loss reserves, which are intended for situations like this. BlockFi could survive if it doesn't get any of the Bitcoin back, but in all likelihood, it won't have that problem.
How BlockFi is recovering its Bitcoin
Since Bitcoin transactions can't be reversed, BlockFi has contacted users who received an incorrect payout and asked them to return it.
Some users were already able to withdraw the Bitcoin they received. For those who did, BlockFi sent emails threatening legal action if the crypto wasn't returned by a deadline. It also offered a $500 reward for returning it.
Those threatening emails haven't been entirely well received. Some of the users who withdrew the Bitcoin said they didn't realize what had happened. And there have been users who received these emails even though they withdrew their own assets, not BlockFi's. The combination of the initial error and a lackluster response could have some people looking for other cryptocurrency exchanges.
There has been quite a bit of debate on Reddit and other sites about whether BlockFi could legally recover its Bitcoin. Based on its account terms, the odds would be in BlockFi's favor. Those terms prohibit users withdrawing funds that they don't own and didn't either purchase or transfer to their accounts.
It's an interesting situation, though. Customers who receive erroneous deposits in their bank accounts or through their stock brokers can't keep the funds. So far, there haven't been any similar cases with cryptocurrencies.
BlockFi is likely going to recover all or most of the Bitcoin that it accidentally sent to its users. The real issue is how this affects its reputation, as this is a high-profile mistake for a major cryptocurrency exchange.
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FAQs
BlockFi accidentally sent Bitcoins to its users
Will BlockFi users get their crypto back? ›
BlockFi has said it is unlikely to fully repay customers who had interest-bearing BlockFi accounts. The company previously estimated that those customers might receive between 39.4% and 100% of the value in their accounts. As part of the agreement, BlockFi agreed to drop its lawsuit over 56 million in Robinhood (HOOD.
What happened to my money in BlockFi? ›
A judge ruled in early 2023 that assets held by users in their BlockFi “wallet” belonged to the users and could be withdrawn. However, assets in the interest-bearing account (which is where my stablecoin was) technically still belong to the bankrupt company's estate, and were not necessarily available for withdrawal.
Can you keep the money if someone accidentally sends you crypto? ›
Due to the irreversible nature of cryptocurrency protocols, transactions can't be cancelled or reversed once initiated. If you sent funds to the wrong address, you'll need to contact the receiving party and ask for their cooperation in returning the funds.
How do I get my bitcoin back from BlockFi? ›
You can now withdraw your BlockFi crypto from BlockFi and send it to your Exodus self-custody wallet. If you need to, you can download Exodus here: Download Exodus. BlockFi recently announced that eligible BlockFi Wallet accounts will be able to withdraw their crypto to a wallet of their choice.
How much did BlockFi customers get back? ›
BlockFi's customers will also have an allowed customer claim of $185.2 million based on the frozen deposits on the FTX exchange. The settlement comes months after a U.S. bankruptcy judge in November lifted an automatic holding that prevented the companies from continuing proceedings.
Will I ever get my money back from crypto? ›
In some cases, it may be possible to recover a portion or all of the funds through legal means or assistance from law enforcement agencies. However, it's important to note that recovering funds from cryptocurrency scams can be challenging, and in many instances, complete recovery may not be possible.
How do I get my money out of BlockFi? ›
Blockfi provides several ways to take out your money. The main method is to directly move money from your BlockFi wallet to another wallet. For example, you can move money to a digital bank or a different crypto wallet. Log in to your account, pick what you want to withdraw, and send it over.
Will BlockFi survive? ›
(Reuters) -BlockFi emerged from bankruptcy on Tuesday, saying it will wind down operations and begin returning crypto assets to customers 11 months after it was swept away by the turbulence in the cryptocurrency industry following FTX's collapse.
When did BlockFi stop withdrawals? ›
How we got here. BlockFi first paused customer withdrawals in November 2022 and subsequently filed for Chapter 11 bankruptcy protection soon after. In September 2023, the bankruptcy court approved BlockFi's Chapter 11 plan to pay back its 10,000 creditors.
You cannot keep money that was mistakenly deposited into your account; it must be returned.
Can I recover my scammed crypto? ›
Yes, it is possible to recover scammed cryptocurrency with legal action. However, it's essential to understand that crypto scam recovery services are not included in cryptocurrency tracing, which aims only to identify payment paths on the blockchain.
What happens if someone accidentally sends you money? ›
If a stranger sends you money and requests you to return it, contact the payment app directly and don't communicate with the sender. The payment app or bank will reverse the charge if an accident truly occurred, or they will take the deposit out of your account as they determine its rightful owner.
How to claim BlockFi money? ›
Customers and creditors can either: (1) fill out and file their proof of claim using an online tool set up by Kroll; or (2) print out a “hard copy” proof of claim form, fill it out in pen, and mail the completed form to Kroll. BlockFi has not set up a filing option by email or by fax.
What happens to crypto in BlockFi? ›
BlockFi will start interim crypto distributions through Coinbase this month. BlockFi filed for Chapter 11 bankruptcy protection after the FTX collapse in November 2022.
Can my Bitcoin be refunded? ›
It's impossible to get your money back and to catch that scammer because a Bitcoin transaction cannot be reversed, it can only be refunded by the person receiving the funds. This means you should take care to do business with people and organizations you know and trust, or who have an established reputation.
Can I transfer my crypto out of BlockFi? ›
Blockfi provides several ways to take out your money. The main method is to directly move money from your BlockFi wallet to another wallet. For example, you can move money to a digital bank or a different crypto wallet. Log in to your account, pick what you want to withdraw, and send it over.
Why can't i withdraw bitcoin from BlockFi? ›
Only verified accounts are allowed to withdraw funds on BlockFi, so make sure you're verified. In addition, BlockFi is currently limiting its withdrawals, so make sure that you are eligible to make withdrawals.
Will crypto get back up? ›
Historically, the cryptocurrency market has experienced several crashes, but has always recovered to reach new all-time highs. However, there is no guarantee that this trend will continue, and it's important to be aware of the risks associated with investing in cryptocurrencies.
