Last month, 34-year-old Laguna Beach resident Benjamin Levine logged into his BlockFi account and noticed a sudden windfall of 329 BTC (-0.89%), worth over $16 million dollars at the time.
“Obviously, I was pretty wide eyed when I saw that,” said Levine.
He and his wife were driving, and he pulled over to the side of the road. “It said that I received a bonus payment for April as part of a promotional payment,” said Levine. “And it’s 329 bitcoin. I remember saying to her, ‘Dang! I just won a promotion!’”
Despite the extreme amount, Levine didn’t question his good fortune. The deposit was clearly labeled as a promotion, something he had checked multiple times.
Levine’s bitcoin payment was, in fact, a costly mistake by the crypto lending company BlockFi, which is still trying to recover bitcoin and other cryptocurrencies it incorrectly deposited to users’ accounts as part of a botched round of promotional payments.
The promotion was intended to incentivize users to trade in large volumes by rewarding them with the stablecoin Gemini dollar (GUSD). In some instances, however, the payouts were awarded in BTC, sometimes millions of dollars worth. This mix-up seems to have been an underlying factor in some, though not all, of the erroneous deposits.
The drama that ensued illustrates a tension with centralized platforms. One of the key innovations behind bitcoin is that transactions are not supposed to be reversible. But centralized platforms like BlockFi seem pretty willing to try.
CoinDesk spoke with three different users who, among the dozens who have since surfaced on social media and discussion boards, were mistakenly given BTC rewards. They were able to successfully move some of the bitcoin off the BlockFi platform but expressed confusion and frustration at the lack of communication from BlockFi until days after the deposits, and uncertainty about what might happen next. In all three cases, BlockFi tried to recover the money after it was sent.
Fallout from the BlockFi promo error
On May 14, BlockFi tweeted a brief statement stating there were issues with a March trading promotion, and some participants might be awarded incorrect bonuses.
After CoinDesk reported on May 18 that users were able to move some of those BTC awards off the platform, and therefore beyond BlockFi’s control, BlockFi issued a statement on May 19 expanding on the issue. It confirmed CoinDesk’s reporting, tweeting that “a small edge case of approximately 100 clients were (sic) able to access the erroneous deposits and withdraw funds from the platform on May 17.”
“I don’t think it’s too big of a topic,” he said. “We processed the promo payout and there was a bug and an error made where we processed it in bitcoin instead of in dollars. I think things got a bit confused online because there were some users who, for an hour, had 700 bitcoin show up in their BlockFi account. That was very quickly changed and corrected.”