The Home Office underestimated how many zombie knives and machetes would be surrendered ahead of a recent ban, documents show.
Research by the BBC also suggests some owners may have been offered more in compensation than their knives cost.
An MP said there were "huge flaws" in the government's original impact assessment for the scheme, while another queried why compensation was not capped.
The Home Office said the scheme had taken dangerous weapons "off our streets" and that compensation claims had "undergone stringent review".
The ban was introduced by the previous Conservative government to cut serious violence and crime.
It widened the definition of zombie knives, which were already banned, to include knives that were 8in (20cm) long, if they had other specific features.
The Home Office opened a month-long surrender and compensation scheme before it became law on 24 September.
It offered to pay a minimum of £10 per knife to retailers and individuals handing in three or more.
But BBC research suggests knives of the type banned could be bought far more cheaply than this.
It comes after an investigation found illegal blades were still available to buy online, a month after they were outlawed.
An impact assessment shows the Home Office thought owners would hand in 472 blades, resulting in compensation of about £14,000.
Officials would not reveal the actual total but said the results of the scheme would be published "shortly".
However, partial data from several police forces in England and Wales shows at least 39,000 knives were surrendered.
One retailer in the West Midlands handed in more than 100 blades.
Nottinghamshire Police said it saw 455 knives surrendered, while Avon and Somerset had more than 1,000.
On 9 September, Luton-based Sporting Wholesale delivered 35,871 blades to Bedfordshire Police and made a claim for compensation.
There is no suggestion the firm did anything illegal or intended to profit from the scheme.
Among the knives it surrendered were hundreds of a blade known as k-mach-165.
Sporting Wholesale, which owns the Anglo Arms knife brand, is thought to have sourced its knives and machetes from China.
One Guangdong-based supplier, which the BBC is not naming, sells similar knives, including one advertised online alongside a sheath marked "Anglo Arms".
Posing as a business wanting to import knives into Western Europe, the BBC asked the supplier for its latest product list, costs and a shipping estimate for 30,000 knives.
A knife very similar to k-mach-165 was offered to us for $5.58 if we ordered 1,000 of them.
Using an exchange rate from 25 January, and adding shipping costs, import duty of 8% and VAT at 20%, the knife would land in the UK for about £6.15.
Sporting Wholesale would not say if it used the same supplier or if it anticipated it would profit from the compensation scheme.
The company would also have faced other costs, such as storage and staffing, above the price of the blades.
K-mach-165 has been advertised for sale in the UK for about £15.
Another blade handed in by Sporting Wholesale was the k-mach-572.
It surrendered at least 12 boxes of this model, each containing 12 blades.
The Chinese supplier offered to sell our reporter 1,000 similar blades for $5.58 each, which would land in the UK for about £6.15.
It also offered to sell another knife model, which had also been surrendered, similar to one used to murder a man in Luton in 2023.
The supplier said the knife would cost about £10.85 each, when buying 1,000.
Sporting Wholesale is based in a warehouse on the outskirts of Luton.
Sarah Owen, Labour MP for the area, said: "Thirty-five thousand knives off the street is better than 35,000 knives on the streets."
But she said the Home Office's impact assessment "clearly had flaws - huge flaws".
Ms Owen added: "I think former ministers who set up this scheme really have questions to answer on how they decided that compensation was going to be allocated and to who.
"But I think we need to look at why it was that it was designed this way, because clearly it wasn't designed for the quantity of knives that were actually handed in."
The Home Office said its estimates were based on a previous surrender and compensation scheme in 2019.
In a consultation in spring 2023, it added, zombie knife retailers did not provide data on sales or stock.
Richard Fuller, Conservative MP for North Bedfordshire, said the government should have considered capping compensation payments to avoid an "open-ended cost to the taxpayer".
He said: "Whether or not this particular store should get its full compensation - I don't think it's clear yet that that should be paid and my advice to the government would be to go back and check its homework and see what its rights are under legislation it's passed."
He also supported the aim of getting more knives off the streets.
A Home Office spokesperson said: "All claims for compensation submitted under the 'zombie-style' knives and machetes surrender scheme have undergone stringent review.
"Dangerous weapons with no other purpose but to harm have been taken off our streets, supporting our mission of halving knife crime and serious violence within a decade."
Sporting Wholesale declined to comment.
The Chinese supplier was contacted but did not respond.