Experts called for stronger verification and oversight to ensure that exchanges hold the assets they claim to hold
In an unprecedented blunder, Bithumb, South Korea’s second-largest cryptocurrency exchange, accidentally gave away 620,000 bitcoins, worth around US$44 billion, that did not actually exist.
The fiasco has highlighted systemic vulnerabilities of cryptocurrency exchanges that can generate and distribute assets that it may not actually hold, shaking public faith in the virtual asset ecosystem as a whole.
According to explanations from sources in financial regulatory institutions compiled on Sunday, Bithumb accidentally distributed a total of 620,000 bitcoins to 249 users who had been selected in a promotional giveaway at around 7 pm on Friday.
Originally, the company meant to give away around 2,000 won (US$1.35) to each user participating in the event, but it ended up inputting “number of bitcoins” rather than “won,” resulting in payments of 2,000 bitcoins per user. In doing so, it credited around US$44 billion to user accounts, giving phantom payments to the tune of about nine times the value and 14 times the quantity of its actual bitcoin holdings.
As these phantom bitcoins flooded Bithumb’s internal exchange, the value of 1 bitcoin fell to as low as around 80 million won among Bithumb traders — around 17% lower than the 98 million won going rate on other exchanges.
After realizing its error, Bithumb moved to suspend trading and withdrawals of the mistakenly distributed tokens.
Financial regulators held an emergency meeting regarding the matter to determine the cause of the incident and to draft potential countermeasures. Bithumb swiftly issued a statement vowing to compensate users for all losses they incurred by selling their bitcoin holdings upon seeing the price plummet.
Some in the crypto industry view the ordeal as an isolated incident involving a single employee’s human error, with many pointing to Bithumb’s swift response. Yet others say the incident has shaken trust in crypto as a whole.
The incident demonstrated that an exchange employee or insider can artificially create assets in the company ledger even if they aren’t in the company’s actual holdings, and then distribute those nonexistent assets to users. It also demonstrated that the exchange had no internal system or controls for detecting or preventing such an error in real time.
The fluke stemmed from a systemic limit inherent to centralized exchanges, which rely on transactions recorded on an internal ledger. Even if a user purchases bitcoin through the exchange, the actual virtual assets pertaining to that purchase are not actually transferred to the user who purchased them. Transactions are facilitated by the exchange, which reflects each transaction by changing the relevant figures pertaining to assets listed in the centralized ledger.
Real on-chain transfers of assets only occur when a user moves assets from one exchange to another. The same system is used by other exchanges worldwide, like Binance.
Current laws in Korea designed to protect crypto exchange users require exchanges to hold blockchain-based assets, which are theoretically impossible to forge or manipulate, in the exchange’s wallet in amounts that equate to assets listed on its centralized ledger.
As of September 2025, Bithumb held around 42,000 bitcoins in entrusted assets and 175 bitcoins in actual holdings in its wallet.
But by giving out a far greater amount of assets than in its wallet, the company appears to have violated legal provisions that state that virtual asset service providers must have in their holdings the same kind and quantity of virtual assets entrusted by users — an infraction which can be penalized with a fine of up to 100 million won (around US$68,300).
“It’s a really unfortunate turn of events that has compromised trust in cryptocurrency markets, which took a lot of effort to build in the first place,” commented one industry insider.
The incident has highlighted the clear limitations of current legal frameworks in curbing risks, prompting some experts to argue for a system that allows for external checks and balances and stronger ledger management.
“Traditional capital markets are divvied up by function into brokerages, exchanges and securities depositories, which all act as checks and balances on one another, but crypto exchanges are a one-stop shop for trading, custody and brokerage, making them more insulated from external oversight,” noted Lee Jung-soo, a professor at Seoul National University School of Law specializing in financial law.
“There needs to be rigorous verification and oversight into whether exchanges actually hold the assets they say they do,” he added.
Kim Kab-lae, a research fellow at the Korea Capital Market Institute, echoed Lee’s sentiment.
“The root of this latest ordeal with Bithumb is a lack of ledger management and internal control systems,” Kim said. “Any exchange that does not have a system which automatically checks its actual holdings at each transaction point and blocks payments or trades that exceed that amount needs to make one.”
