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Bithumb's 60 Trillion Won Bitcoin Blunder Triggers Major Regulatory Probe

South Korean financial authorities have launched a formal investigation into crypto exchange Bithumb following a massive erroneous payout. The exchange accidentally distributed 620,000 bitcoins instead of 620,000 won to customers during a promotional event, triggering a sell-off. While most of the mis-sent bitcoins were retrieved, 1,788 tokens had already been sold, exposing vulnerabilities in the exchange's internal book-entry trading system. The investigation coincides with pending virtual asset legislation and plans for tougher penalties on financial companies for IT infrastructure failures.

Key Points: Bithumb Bitcoin Payout Error Sparks FSS Investigation

  • 60 trillion won erroneous payout
  • 1,788 bitcoins sold before recovery
  • Probe into "phantom balance" system risks
  • New penalties for IT accidents planned
2 min read

Regulator launches probe into Bithumb's accidental bitcoin pay out

South Korean regulators launch probe after Bithumb accidentally pays 620,000 bitcoins in a promo error, exposing systemic risks in crypto exchanges.

"We are taking this case very seriously. The FSS will take stern legal actions against acts that harm the market order. - Financial Supervisory Service official"

Seoul, Feb 10

Financial authorities began a formal investigation on Tuesday into Bithumb, a local crypto exchange, to determine how it was able to pay out over 60 trillion won in bitcoins it apparently did not have, industry sources said.

Regulators informed the crypto exchange Monday that an investigation will be conducted, three days after they conducted an on-site inspection, according to the sources, reports Yonhap news agency.

"We are taking this case very seriously," an official from the Financial Supervisory Service (FSS) said. "The FSS will take stern legal actions against acts that harm the market order."

On Friday, Bithumb erroneously sent 620,000 bitcoins, instead of the 620,000 won originally planned, to 249 customers in a promotional event, triggering a sell-off at the exchange.

Most of the mis-sent bitcoins were retrieved immediately after the accident, but 1,788 tokens were already sold off, the crypto exchange said in a statement.

Centralised exchanges like Bithumb use a "book-entry trading system," in which exchanges record ownership and execute trades electronically within their internal databases, rather than recording every transaction on the public blockchain.

Such a system, if mishandled, could generate "phantom balances," resulting in a discrepancy between listed balances and actual reserves.

Bithumb held around 42,000 bitcoins as of end-September, of which all but 175 tokens were customer-entrusted crypto.

Tuesday's investigation also comes amid pending legislation on virtual assets at the National Assembly.

The country's financial watchdog said that it will introduce a set of measures to impose tougher penalties on financial companies for IT infrastructure-related accidents.

The Financial Supervisory Service (FSS) said it will draw up measures to prevent IT accidents in the financial sector, which will include punitive penalties and enhanced regulations on IT security in order to better protect consumers.

- IANS

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Reader Comments

R
Rohit P
620,000 bitcoins by mistake? That's a mind-boggling error. Shows how fragile these "book-entry" systems can be. Phantom balances are a scary concept for investors. Glad most were retrieved, but those 1,788 sold... someone got very lucky! 😅
A
Aman W
Respectfully, while the investigation is needed, the focus should be on preventing such IT failures, not just punishment. The article says they held only 42k BTC but 'sent' 620k. That's a massive system flaw. Indian fintech companies must learn from this and invest heavily in tech audits.
S
Sarah B
As someone who trades a bit, this is terrifying. It undermines trust in the entire exchange ecosystem. If they can create bitcoins out of thin air by mistake, what else is possible? Strong regulations with consumer protection are the only way forward.
V
Vikram M
This is a classic case of "chaltha hai" attitude in tech operations coming back to bite. In India, we see similar lapses in banking apps sometimes. Strict penalties for IT accidents are a must. Hope our regulators are taking notes.
K
Karthik V
The promoted event was for 620,000 Won and they sent Bitcoins worth trillions? Someone didn't check the dropdown menu for currency! 🤦‍♂️ Jokes aside, this highlights a serious lack of internal controls. Makes you wonder about the safety of your own crypto holdings on exchanges.

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