South Korea’s financial regulator has launched an investigation into crypto exchange Bithumb after it mistakenly credited users with hundreds of thousands of Bitcoin it did not actually hold.
According to Yonhap News, the Financial Supervisory Service (FSS) is probing Bithumb over suspected platform violations related to the erroneous crediting of billions of dollars’ worth of non-existent Bitcoin to customer accounts.
Bithumb acknowledged the incident on Saturday, saying it “incorrectly credited” 620,000 BTC—worth about $42.8 billion at the time—to user accounts during a promotional event.
While the exchange has recovered most of the mistakenly credited Bitcoin, roughly 125 BTC, valued at around $8.6 million, remains unresolved. The incident has renewed concerns about operational risks at centralized exchanges and sparked community debate over so-called “paper Bitcoin.”
Authorities flag potential violations
Although Bithumb said the error did not cause any loss to customer assets, South Korea’s financial authorities have emphasized the broader market implications.
“We are taking this case very seriously,” an FSS official was quoted as saying, adding that the regulator would pursue “stern legal action against activities that undermine market order.”
The regulator pointed to several alleged breaches by Bithumb, including discrepancies between the amount of cryptocurrency held in the exchange’s wallets and the balances credited to user accounts.
The FSS also flagged weaknesses in Bithumb’s internal controls, saying the mistake was caused by a single point of failure, with one employee reportedly responsible for entering the incorrect Bitcoin credit.
“Paper Bitcoin” concerns grow
CryptoQuant analyst Maartunn told Cointelegraph that the 620,000 BTC were not “real” Bitcoin, explaining that the balances existed only virtually and were visible solely within Bithumb’s internal systems.
He said the issue arose during a promotional campaign meant to reward users with 2,000 South Korean won (about $1.40), but instead credited 2,000 BTC per user after an employee mistakenly selected “BTC” as the unit instead of “won.”
“To put this into perspective, Bithumb currently holds around 41,798 BTC in reserves, far less than the virtual 620,000 BTC that briefly appeared on its books,” Maartunn said, adding that some users were able to benefit from the error.
“Around that time, 3,875 BTC, or around $268 million, were withdrawn from the exchange. This may partly reflect users who managed to withdraw the mistakenly credited BTC, but it could also indicate a broader loss of confidence among other users.”
As a result, the figures disclosed by Bithumb appear lower than what on-chain data indicates, Maartunn said.
The incident has further fueled community concerns around so-called “paper Bitcoin”—Bitcoin that does not exist on the blockchain but is traded on centralized exchanges or through financial products such as derivatives and exchange-traded funds.
Some commentators have argued that the expansion of paper Bitcoin trading has played a role in recent market volatility, with Bitcoin down roughly 43% from its October 2025 peak.
