Well, it’s finally over. As noted in previous blog posts, back when interest rates were essentially zero, I started an account with cryptocurrency investing firm BlockFi. They paid me a hefty 9% per year for lending out my crypto coin to “trusted institutional counterparties”, backed by large collateral. However, when Sam Bankman-Fried’s FTX exchange went belly up, it took BlockFi with it. (Bankman-Fried, the former rock-star white knight of the crypto world, is now in prison for fraud). My funds at BlockFi disappeared into the black hole of bankruptcy proceedings for about a year and a half.
Last month, a judge finally allowed a settlement for clients to withdraw their assets from their interest-bearing accounts. There were two wrinkles. First, you get far less than 100% of your funds. Most of my money got chewed up in the corporate bankruptcy itself, and then was eaten by the law firm (Kroll) processing the bankruptcy and the client reimbursement process. So, I’m only getting about 27% percent of my money back.
As an aside, Kroll got hacked about a year ago, leaking the names and email addresses of us BlockFi clients, and so some scammer sent out a very well-crafted email that a number of people, including me (briefly) were taken in by, as I wrote earlier. if you responded to that scam email, you ended up connecting your wallet to a scam application, which could then suck everything out of your wallet. Fortunately, I had almost nothing in my wallet for the short time I had it connected, but other victims lost considerable sums. I guess the reason why criminals continue to run crypto scams is because they are profitable, like the legendary bank robber Willie Sutton who robbed banks because “that’s where the money is.”
The other wrinkle In the BlockFi reimbursement is that they will only reimburse you with the actual cryptocurrency coin that you held, not with its dollar value. So, I had to set up a cryptocurrency wallet (I used Trust wallet) to receive my crypto, which was all in the form of the stablecoin USDC.
I had to do considerable background work to make this happen. In order to test that that wallet worked to receive USDC, I had to also set up a cryptocurrency exchange account, which I did with Coinbase (which seemed to be the most solid crypto exchange). I had to connect that account with my bank, put some money into the Coinbase exchange, buy some USDC, and send it to my crypto wallet to make sure that it all worked.
As of a week ago, after some fairly intrusive ID verification, the reimbursement machinery did finally deposit the measly remnants of my USDC into my wallet. OK, I thought, I’ll just transfer that to my Coinbase exchange account, turn the USDC into cash and be done with it all.
But not so fast… Because USDC is transferred over the Ethereum network, I had to have enough ETH coin in my Trust wallet to pay for the transfer. The network transfer cost, called the gas fee, was about eight dollars at midday, going down to about three dollars by 10 o’clock at night.
So, I had to go into my Coinbase account, convert some USDC there into ETH (incurring a $1.49 fee for that), and then send some ETH to my Wallet, incurring yet another a transfer fee there. Then I could use that ETH in my wallet to pay for the transfer of the USDC to my Coinbase exchange. Then at long last I was able to convert my USDC to cash and transfer it to my bank account, to finally put this whole BlockFi drama to rest.
Looking on the bright side of all this uproar, I now have a functioning cryptocurrency exchange account and wallet, and am familiar with elementary crypto operations. This might prove handy if I ever want to dabble more in this area or if some other need arises. For now, however, I have had enough of crypto.
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