Paxos claims responsibility for $500K transaction fee error

Paxos has claimed to be responsible for an oversized Bitcoin (BTC) transaction fee in a statement to CryptoSlate on Sept. 13.

The transaction in question took place on Sept. 10. The company attempted to send 0.07 BTC (about $2,000) but included a fee of 20 BTC (about $500,000).

A Paxos spokesperson said:

“Paxos overpaid the BTC network fee on Sept. 10, 2023. This only impacted Paxos corporate operations. Paxos clients and end users have not been affected and all customer funds are safe.”

The representative added that the transaction resulted from a “bug on a single transfer [that] has been fixed” but did not provide further details. Most speculation suggests that a bug exists in a Bitcoin wallet rather than on the Bitcoin blockchain itself.

The Paxos spokesperson added that the firm is trying to recover the fee through a Bitcoin miner. A member of the mining pool responsible for processing the transaction said on Sept. 10 that they would pause the transaction and wait for the sender to claim the fee; otherwise, they intend to redistribute the fee to other Bitcoin miners.

Earlier speculation suggested PayPal involvement

Early speculation suggested that the address that sent the oversized fee belonged to PayPal. That speculation originated with Twitter/X user Mononaut, who noted that the address behind the latest transaction engaged in behaviors that resembled activity on a defunct address tagged as belonging to PayPal on OXT.me.

Furthermore, Mononaut suggested that funds were migrated between the two Bitcoin addresses through an intermediate address.

Paxos and PayPal do have a working relationship, with the latter having chosen Paxos to issue its PYUSD stablecoin last month. A Paxos spokesperson declined to state whether the address has any relation to PayPal.