Bithumb South Korea hit with parliamentary inquiry over Bitcoin mishap

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Bithumb under regulatory review

$40 Billion error sparks parliamentary hearing

Lawmakers questioned Bithumb CEO Lee Jae-won over an erroneous transfer estimated at roughly $40 billion in Bitcoin, Bloomberg reports. The mistake occurred during a promotional payout in which an employee was supposed to distribute small won-denominated rewards but instead processed Bitcoin transfers.

According to details disclosed during the hearing, approximately 2,000 BTC were mistakenly sent to each eligible user rather than 2,000 Korean won. Some recipients immediately sold the coins, triggering sharp volatility in the BTC/KRW trading pair on the exchange before trading was halted Friday evening.

“Bithumb gave away Bitcoin that were not in the company’s possession, and that is what we call naked short selling,” said Min Byeong-deok, a lawmaker from the ruling Democratic Party, during the session. He added that the exchange effectively distributed so-called “ghost Bitcoin.”

Lee apologized during the hearing, stating: “We sincerely apologize to the public who were deeply distressed by the erroneous overpayment in our promotional event.” He attributed the incident to a system failure and acknowledged that internal safeguards did not function properly.

“The exchange’s policy of checking the volume of currency to be transferred against its actual holdings had failed, and the amount was also not earmarked in a separate account to ensure the safety of the transaction,” Lee said.

Recovery efforts and regulatory fallout

Bithumb said most of the mistakenly transferred assets have been recovered, though 1,786 Bitcoin were reportedly sold before accounts were frozen. South Korea’s Financial Supervisory Service has launched an investigation into compliance and risk management at the country’s second-largest exchange.

Kwon Dae-young, vice chairman of the Financial Services Commission, said: “The government considers this incident a serious matter that has exposed risks related to virtual assets and vulnerabilities in internal control systems.”

Lawmakers also questioned whether exchanges should be permitted to issue won-denominated stablecoins without stronger safeguards, reflecting broader concerns about oversight in a market that has grown rapidly alongside South Korea’s retail investor base.

Conclusion

Bithumb’s $40 billion Bitcoin transfer error has exposed weaknesses in internal control systems at one of South Korea’s largest exchanges. Lawmakers and regulators have launched investigations and signaled potential institutional reforms. The incident underscores the growing political scrutiny facing crypto platforms in markets where retail participation has surged.

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