Bithumb, South Korea’s second-largest cryptocurrency exchange, has acknowledged critical internal control lapses that led to the mistaken transfer of bitcoin valued at more than $40 billion to customers, an error that briefly destabilized trading on the platform.
CEO Lee Jae-won told lawmakers during a parliamentary hearing that weaknesses in the exchange’s systems left it vulnerable and allowed the massive misallocation to occur. Most of the erroneously distributed funds have since been recovered.
According to Reuters, the incident involved Bithumb crediting users with 620,000 bitcoins instead of 620,000 won (approximately $428). The scale of the error — about 15 times the exchange’s reported holdings of 42,000 BTC — triggered a sharp 17% drop in bitcoin’s price on the platform before accounts were frozen.
Lee attributed the failure to operational shortcomings, including a 24-hour delay in processing transactions and lagging updates to internal balance records. These gaps created a discrepancy between actual reserves and transferred assets. He acknowledged that safeguards requiring transfers to match verified holdings were not properly enforced, and that the funds were not ring-fenced in a separate account prior to the transaction.
“We are acutely aware of the deficiency in internal system control,” Lee said.
While Bithumb has retrieved the majority of the bitcoin, 1,786 BTC remain unrecovered after being sold within minutes before the exchange halted activity, Reuters reported. Customers who liquidated those assets are legally obligated to return them.
The episode has drawn attention from regulators. South Korea’s Financial Supervisory Service (FSS) said it will investigate “high-risk” practices that could disrupt market order, including large-scale price manipulation by major holders, irregular trading linked to suspended deposits and withdrawals, and coordinated pump schemes driven by social media misinformation.
The regulator also plans to deploy enhanced monitoring tools capable of identifying suspicious trading activity at second- and minute-level intervals, along with artificial intelligence systems designed to analyze text data and flag potential abuse.
Lawmakers expressed concern about shortcomings in corporate governance and regulatory oversight in South Korea’s fast-growing digital asset market. With an estimated 10 million investors and exchanges such as Upbit and Bithumb generating revenues in the trillions of won, the sector has become a significant component of the country’s financial landscape.
