South Korea opens probe into Bithumb after $43 billion transfer error
South Korea’s Financial Supervisory Service on Tuesday launched a full-scale investigation into cryptocurrency exchange Bithumb following a mistaken bitcoin transfer worth about $43 billion.
The regulator escalated what had been a routine inspection after the exchange last week mistakenly distributed 620,000 bitcoin to hundreds of users, according to Yonhap News Agency.
An FSS official said the probe is being conducted with the "utmost seriousness", adding that authorities will take firm action against any behavior that disrupts market order. Investigators are examining how Bithumb was able to distribute a volume of bitcoin that far exceeded its actual holdings.
Fat-finger error
The incident occurred on Feb. 6 during a promotional campaign, when a staff member entered bitcoin instead of Korean won as the reward unit, resulting in 620,000 bitcoin being credited to user accounts.Bithumb said it has recovered 99.7% of the mistakenly distributed assets, as well as 93% of the 1,788 bitcoin that users sold. About 125 bitcoin remains unrecovered. The exchange pledged to compensate affected users at 110% of their losses after the BTC-KRW trading pair on its platform dropped about 15%.
The company also said it plans to strengthen internal controls and establish a 100 billion won ($68 million) user protection fund to address unexpected risks.
Analysts said the incident highlighted weaknesses in Bithumb’s risk management, noting that the exchange was able to execute transactions involving bitcoin volumes it did not hold. Local media reported that Bithumb had about 46,000 bitcoin at the time.
Political fallout
The case has drawn political scrutiny as South Korea debates the Digital Asset Basic Act, the country’s second comprehensive framework for regulating cryptocurrencies.Opposition lawmaker Na Kyung-won of the People Power Party said the incident underscored structural risks in the sector, warning that exchanges operating through internal ledger entries without corresponding on-chain transfers could face liquidity runs.
People Power Party spokesperson Choi Bo-yoon said the operational reliability of domestic crypto exchanges had fallen below acceptable standards. The ruling Democratic Party said the episode exposed critical shortcomings in internal controls and accounting systems.
In response, the ruling party announced plans to cap individual ownership stakes in cryptocurrency exchanges at 15% to 20%, reviving a proposal that had previously faced industry resistance. Regulators and lawmakers are also discussing tougher requirements that would align crypto exchanges’ legal responsibilities more closely with those of traditional financial institutions.
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