Blockfi has mistakenly paid out over 700 BTC to participating traders in its March trading competition and has threatened legal actions against traders that have refused to return them.
The crypto lending platform sent the payments in error in an attempt to pay out beneficiaries of the trading promotion but used BTC to pay instead of USD. The promotional trading event, held from March 18 to March 31, chooses e
ligible recipients by asking them to trade a specific amount of BTC within the specified period. Winners of the competition were to be credited with the promotional bonus on the 31st of May after the compilation of beneficiaries might have been concluded.
Blockfi, however, tweeted later on that the distribution system of the platform is encountering technical issues and might have disbursed the wrong figures to the accounts of clients, adding that they are doing their best to fix the situation.
A spokesperson for Blockfi has reported having erroneously sent the unmerited amounts to over 100 users.
Blockfi to Institute the Use of Legal Systems to Recover BTC Loss
Blockfi CEO, Zac Prince, has said that the loss recorded through the mistake stands at over $10,000. However, the amount has been reduced as some beneficiaries have been returning the excessive funds given.
As the crypto lending platform accelerates efforts to recover the overpaid funds, some users have failed to return the amount they received as most of them withdrew the BTC to other wallets believing that they were rewards from their participation in the competition.
Several users of the platform revealed that Blockfi is making legal moves to apprehend users that have failed to return their overpaid rewards. Blockfi in an attempt to incur further losses has restricted users from withdrawing.
The platform has also pledged to reward traders that refunded the excess payment with $1000.
Reactions From Blockfi CEO Over the Issue
Zac Prince wrote about the issue by email stating: “Blockfi carries loss reserves as part of its accounting policies and this is a fraction of the existing loss reserves — so no negative impact to equity or ongoing platform operations.”
Prince has assured users that the triggers that led to the system malfunction have been fixed as they have as well increased safeguards to prevent similar occurrences in the future. He went further to state that the overpaid deposits to users will not affect the operation of the company or reduce the records that they hold in trading performance.
TrueMark CEO, Mike Loukas, said that the Blockfi incident is just a glitch and has occurred before with similar financial institutions including the banks causing losses in dollars, however, he stated that the volatile nature of the asset, in this case, magnifies the error made by the company.
The Blockfi event reiterates another similar error made by another lending platform, Citigroup Inc.’s as they erroneously sent over $500 million to some lenders.