A NOVICE crypto investor has mistakenly received £185,000 worth of Bitcoin after trading platform BlockFi sent hundreds of users incorrect promotional payments.
Crypto lender and trading platform BlockFi has admitted it made incorrect transfers to around 100 investors and has asked for the money back.
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Cryptocurrencies have soared in value in recent months due to institutional and high-profile backing for virtual coins such as Bitcoin.
There are lots of risks associated with cryptocurrency trading though as trading platforms where the coins can be bought and sold are only regulated for anti-money laundering.
There is little protection if things go wrong and the price of cryptos is highly speculative and volatile.
Regulators have also warned that investors could lose all their money.
5 risks of crypto investments
THE Financial Conduct Authority (FCA) has warned people about the risks of investing in cryptocurrencies.
- Consumer protection: Some investments advertising high returns based on cryptoassets may not be subject to regulation beyond anti-money laundering requirements.
- Price volatility: Significant price volatility in cryptoassets, combined with the inherent difficulties of valuing cryptoassets reliably, places consumers at a high risk of losses.
- Product complexity: The complexity of some products and services relating to cryptoassets can make it hard for consumers to understand the risks. There is no guarantee that cryptoassets can be converted back into cash. Converting a cryptoasset back to cash depends on demand and supply existing in the market.
- Charges and fees: Consumers should consider the impact of fees and charges on their investment which may be more than those for regulated investment products.
- Marketing materials: Firms may overstate the returns of products or understate the risks involved.
Steve Brooks had only been trading with BlockFi for a month but took part in a promotion that paid users free Bitcoins (BTC) if they made trades during March.
The 38-year-old consultant had only £60 worth of cryptos in his account before the promotion but was shocked when he logged in this month to see he had been sent 5.3 (BTC) worth $261,000 as a “reward” from BlockFi.
Steve said: “I had no idea what was going on.”
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He successfully transferred the Bitcoin into another cryptocurrency wallet so he could verify that it was real.
Steve added: “I could have done anything with it at that point – changed it into another currency or withdrawn it into my bank account.”
He was one of hundreds of clients from around the world that had taken part in BlockFi’s promotion and received incorrect sums.
One Twitter users said they had been sent 700BTC, worth £21 million, from the US-based cryptocurrency lender.
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In an email to Steve, BlockFi said: “Failure to return the erroneously received assets constitutes a crime and will result in BlockFi taking legal action.”
The Doncaster-based investor consulted with lawyers over the payment and eventually decided to send the money back in return for £3,500 compensation.
He said: “Cryptocurrency is a very murky world.
“It was quite exciting, potentially they would have no recourse to the funds.
“After a few days of sitting on it, I’ve made a bit of money.
“There’s still the thought in the back of my mind that what if I’d held onto the Bitcoin.”
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BlockFi said in a statement on Twitter that approximately 100 clients were able to “access erroneous deposits and withdraw funds from the platform on 17 May.”
It said: “The company’s exposure is currently approximately $10 million and decreasing quickly as clients are returning funds.
“We are incredibly grateful for our clients understanding the mistake and returning funds that did not belong to them.
“BlockFi holds crypto and dollars on our balance sheet as part of our normal operating procedures.
“The outstanding amounts are a small fraction of the loss reserves that we plan for as part of our normal accounting policies.
“The crypto that was erroneously withdrawn is entirely unrelated to client funds. All client funds have been safeguarded throughout this incident.”
The Sun has asked BlockFi for further comment.
Virginia Szepietowski, a solicitor with experience in cryptocurrency, told The Sun: “The general principle of the law of restitution would give BlockFi the legal right to demand repayment as it had ‘unjustly enriched’ the recipients.”
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Bitcoin had hit an all-time high of $64,863 back in April.
But Bitcoin crashed this week after Tesla founder Elon Musk reversed a decision to allow the company’s cars to be purchased using the cryptocurrency.
China has also signalled a crackdown on crypto payments which pushed prices down.
Elon Musk has huge influence over the crypto market as he announces he will no longer accept Bitcoin for Tesla products
