Alby Faces Backlash Over Unexpected Bitcoin Withdrawals

Alby, a Bitcoin Lightning Network wallet, is facing significant backlash after several users reported unexpected withdrawals from their accounts. The deductions, described as inactivity fees, have sparked concerns about transparency and custodial risks within the crypto community.

The controversy gained traction on June 10 after Yu Xian, co-founder of blockchain security firm SlowMist, disclosed that nearly $192 worth of Bitcoin was removed from his Alby account without his direct approval. Xian discovered that Alby had updated its Terms of Service weeks earlier, introducing a clause that allows such fees for inactive accounts. The updated policy, highlighted in an email sent on May 1, stated that accounts with no activity for 12 months are subject to inactivity fees. Xian criticized the fee, calling it a “stealing agreement” and igniting broader debate across the crypto community.

Other Alby users soon echoed Xian’s experience. A pseudonymous user, “1999_eth,” posted evidence of losing over $590 in similar deductions. Another user reportedly lost more than $5,400. These revelations fueled concerns that many users may have missed the email warnings.

Luke Gao, the founder of Lnfi Network, sought to clarify the situation. He explained that Alby had previously offered custodial wallets but is transitioning toward a self-custody model through AlbyHub. Luke wrote on social media, “This is not a rug — funds are safe.” He added that users had received multiple notices about this shift over the past 18 months. Additionally, he stated that affected users can still retrieve funds by contacting Alby’s support team.

Despite this reassurance, many in the crypto community remain critical. They argue that despite the inactivity fee disclosures, the deductions resemble embezzlement. Some warn that this practice could set a troubling precedent as it exposes Alby’s ability to access user funds without direct consent. Alby has yet to issue a public statement or respond to requests for comment.

This incident highlights the importance of transparency and clear communication in the crypto industry. Users expect their funds to be secure and any changes in policies to be clearly communicated. The backlash against Alby underscores the need for platforms to prioritize user trust and security, especially when transitioning to new models or introducing new fees.