Bithumb’s erroneous distribution of 620,000 bitcoins is widely seen as more than just human error, laying bare serious structural flaws in the cryptocurrency exchange’s asset ledger management system and internal controls, financial authorities and politicians said Sunday.
Controversy centers on the system’s failure to properly block abnormal transactions. Questions have also been raised over how Bithumb, whose actual bitcoin holdings are estimated at around 40,000, was able to execute payouts totaling 620,000 bitcoins.
Financial authorities believe the unprecedented episode underscores fundamental vulnerabilities in digital asset management, making regulatory sanctions inevitable.
The incident occurred during Bithumb’s “random box” promotional event, which invited users to open a virtual box for cash rewards ranging from 2,000 won ($1.36) to 50,000 won.
On Friday, the country’s second-largest cryptocurrency exchange was about to distribute cash rewards to 695 participants. However, during the payout process at around 7 p.m., an employee mistakenly entered the payout denomination as “BTC” instead of “won.” As a result, 620,000 bitcoins were erroneously distributed to 249 users who opened the random boxes.
With bitcoin trading at about 98 million won at the time, the mistaken payout amounted to about 60.76 trillion won.
Bithumb detected the problem about 20 minutes later and blocked transactions and withdrawals from the affected accounts by 7:40 p.m. During that brief interval, however, 1,786 bitcoins were sold, sending the exchange’s internal bitcoin price down about 17 percent to 81.1 million won, well below the average price on other exchanges.
The abrupt plunge sparked panic selling among users, resulting in unexpected investor losses estimated at around 1 billion won, according to Bithumb.
Bithumb held just 175 bitcoins in its own books as of the third quarter last year, while customer-held bitcoins totaled 42,619. Despite total holdings of fewer than 50,000 bitcoins, the system treated the 620,000 bitcoins as legitimate assets and actually allowed their distribution to users. This shows the exchange’s system failed to automatically block irregular transactions.
Lawmakers expressed serious concern that virtual assets that did not actually exist were created within Bithumb’s internal ledger system, distributed to users and traded in a manner that distorted market prices.
Rep. Na Kyung-won of the main opposition People Power Party said the episode went beyond a simple operational error, calling it a structural failure that demonstrates how weaknesses in an exchange’s internal systems can distort price discovery mechanisms and put investor assets at risk.
“If an exchange functions by merely shifting figures within its internal ledger without any corresponding movement of assets on the blockchain, it is effectively selling coins it does not possess. Such practices could directly trigger a bank run and destabilize the broader market,” she wrote on Facebook.
Kim Ji-ho, spokesperson for the ruling Democratic Party of Korea, echoed those concerns, saying that if a single system malfunction at an exchange can amplify market volatility while shifting losses entirely onto investors, the sustainability of the virtual asset market itself comes into question.
“It has become an urgent priority to establish robust internal controls capable of real-time reconciliation between ledger records and actual blockchain assets, along with multiple verification steps to prevent both human and system errors,” Kim told reporters during a briefing. “Financial authorities should conduct a swift and comprehensive investigation to identify the root causes and determine accountability.”
In response, the Financial Services Commission (FSC), the country’s top financial regulator, along with the Financial Intelligence Unit, the Financial Supervisory Service (FSS) and the Digital Asset eXchange Alliance, established an emergency task force to coordinate follow-up measures.
The task force plans to conduct an on-site inspection of Bithumb, followed by similar reviews of other cryptocurrency exchanges to assess their virtual asset reserves, management practices and internal control systems.
Any violations uncovered during the reviews will be promptly referred to the FSS for a formal investigation.
“We will determine the applicable legal actions once the full scope of the incident is confirmed,” an FSC official said.
The authorities also said they will push ahead with broader institutional reforms aimed at restoring market trust and strengthening investor protection.
Bithumb CEO Lee Jae-won, meanwhile, issued a public apology, pledging to take full responsibility for the incident.
“We express deep regret over our failure to uphold the fundamental principles of stability and integrity expected of a virtual asset exchange,” Lee said.
The company pledged to reinforce its internal control systems and introduce comprehensive safeguards to prevent similar incidents in the future.
It also said it will fully compensate users who incurred losses from the abrupt price drop during the incident and provide an additional 10 percent.
Separately, the exchange said it will offer a 20,000 won payment to all users who accessed its services during the affected period and waive trading fees on all listed assets for seven days.
