Martial law crash: Upbit and Bithumb face record payouts to users
The amount of payments is $2.5 million
According to South Korean news agency Yonhap, cryptocurrency exchanges Upbit and Bithumb are finalizing negotiations with users to pay what they claim to be the largest compensation for system failures caused by the declaration of martial law.
The sudden announcement of martial law by South Korean President Yoon Suk-yeol on December 3, 2024, caused a massive traffic surge, crashing the country’s largest crypto platforms.
Upbit saw its user count spike from 100,000 to over 1.1 million, resulting in 99 minutes of downtime. Bithumb experienced a system failure lasting 62 minutes.
During the incident, many users were unable to trade or withdraw funds, leading to significant losses. Some users are now demanding compensation, and the exchanges are working to settle the lawsuits filed against them.
Reports submitted to the National Assembly indicate that Upbit plans to pay over KRW 3.14 billion across 596 cases, while Bithumb will compensate KRW 377 million for 124 cases. However, the settlement process is not yet complete, and final payout amounts could increase.
Combined, Upbit and Bithumb are set to pay users more than KRW 3.5 billion (approximately $2.5 million), marking the largest compensation in South Korea’s cryptocurrency history.
System failures increase regulatory pressure
The incident has put crypto platforms under regulatory scrutiny, with authorities demanding enhanced server capacity and better emergency response plans.
Additionally, the Financial Supervisory Service is investigating Upbit for alleged money laundering, adding further pressure to the industry. On January 9, the Financial Intelligence Unit warned Upbit of a potential suspension for failing to comply with KYC and AML regulations.
If enforced, the suspension would prevent the exchange from onboarding new customers for up to six months, although existing users would still be able to trade.
As we wrote, the introduction of martial law in South Korea on December 3 triggered a sell-off on cryptocurrency exchanges, causing the prices of many digital assets to drop by 20% or more during the day.
