South Korea’s second-largest cryptocurrency exchange, Bithumb, has acknowledged major internal control failures that led to the mistaken transfer of bitcoin worth more than $40 billion to customers, most of which has since been recovered.
According to Reuters, CEO Lee Jae-won admitted Wednesday that weaknesses in the exchange’s internal systems left it vulnerable to potential sabotage and failed to prevent the massive error.
The incident involved Bithumb accidentally crediting customers with 620,000 bitcoins instead of 620,000 won (approximately $428). The mistaken transfer briefly sent shockwaves through the platform, with Reuters reporting that bitcoin’s price plunged 17% on Bithumb following the error.
Lee told a parliamentary committee that the scale of the giveaway amounted to roughly 15 times the exchange’s holdings of 42,000 bitcoins. He attributed the failure primarily to a 24-hour lag in transaction processing and delays in updating the platform’s crypto balance records.
“We are acutely aware of the deficiency in internal system control,” Lee said during the hearing.
He acknowledged that Bithumb’s safeguards — including policies requiring transferred assets to match actual holdings — broke down. The funds were also not segregated into a separate account to ensure the safety of the transfer process, compounding the lapse.
While the exchange has recovered the vast majority of the mistakenly distributed bitcoin, 1,786 bitcoins remain unaccounted for after being sold within minutes before customer accounts were frozen, Reuters reported. Customers who sold those assets are legally obligated to return them.
In response to the incident, South Korea’s Financial Supervisory Service (FSS) announced plans to investigate “high-risk” trading practices that threaten market order. These include large-scale price manipulation by so-called whales, schemes linked to suspended deposits and withdrawals, and coordinated pump tactics amplified through social media misinformation.
The regulator also said it intends to develop automated surveillance systems capable of detecting suspicious trading patterns at second- and minute-level intervals, alongside artificial intelligence-based text analysis tools designed to flag potential market abuse.
Lawmakers voiced concern over the apparent gaps in both corporate governance and regulatory oversight in South Korea’s fast-growing digital asset market, one of the most active globally by trading volume. Cryptocurrency has become a mainstream investment vehicle in the country, with the number of investors reportedly reaching 10 million. Major exchanges such as Upbit and Bithumb generate revenues in the trillions of won annually, underscoring the sector’s economic significance.
