South Korea’s financial watchdog has launched a full-scale investigation into Bithumb after the local crypto exchange mistakenly distributed an eye-watering $43 billion worth of Bitcoin to users in what authorities are calling one of the most serious operational failures in the country’s digital asset market to date.
According to reports from Yonhap News, the Financial Supervisory Service (FSS) escalated what was meant to be a routine inspection into an in-depth probe following the incident, signaling that regulators view the error as more than a simple mistake. An FSS official said the investigation is being conducted with the “utmost seriousness” warning that stern measures will follow if conduct is found to have undermined market order.
How a Single Input Error Triggered a $43B Crisis
The incident occurred on February 6, when Bithumb accidentally credited roughly 620,000 BTC, valued at about $43.1 billion, across hundreds of user accounts during a promotional campaign. Local media reported the error stemmed from a staff member inputting the reward unit as BTC instead of Korean won (KRW) - a classic “fat-finger” mistake with extraordinary consequences.
Despite the staggering figure, the exchange said it moved quickly to contain the damage. Bithumb claims it has recovered 99.7% of the wrongly distributed Bitcoin and 93% of the 1,788 BTC that users managed to sell before the error was caught. Still, around 125 BTC remains unrecovered, leaving a gap that has drawn intense regulatory attention.
Market Impact and Emergency Compensation
The fallout was immediate. The BTC-KRW trading pair plunged roughly 15% on Bithumb as confusion spread across the platform. In response, the exchange announced it would compensate affected users at 110% of their losses, an unusually generous move aimed at restoring confidence.
Bithumb also pledged to strengthen its internal control systems and establish a 100 billion won ($68 million) user protection fund to cover future emergencies. However, critics argue these measures came only after the incident exposed deep structural weaknesses.
Reserve Concerns and Systemic Risk
One of the most alarming revelations to emerge from the incident is the apparent disconnect between Bithumb’s internal ledger and its actual on-chain reserves. While 620,000 BTC was credited during the error, reports suggest the exchange held only about 46,000 BTC at the time.
This discrepancy has fueled fears about fractional reserve-like practices in crypto exchanges and raised questions about whether similar risks could trigger a broader loss of confidence. The FSS probe is reportedly focused on how such a massive, non-existent balance could be generated and executed without automated safeguards stopping it.
Political Fallout as Lawmakers Step In
The incident has quickly spilled into the political arena, threatening to complicate South Korea’s ongoing efforts to pass the Digital Asset Basic Act, the country’s second comprehensive crypto framework.
Opposition lawmaker Na Kyung-won of the People Power Party called the episode “no mere mishap” warning that exchanges operating by shifting numbers on internal ledgers without corresponding on-chain movements risk setting the stage for a “bank run and total market collapse.”
Even the ruling Democratic Party weighed in, saying the fiasco exposed “critical loopholes” in exchange ledger management and internal controls. In response, lawmakers announced plans to revisit proposals that would cap individual ownership stakes in crypto exchanges at 15%-20%, a measure previously criticized by the industry as growth-stifling.
A Turning Point for Exchange Oversight
Beyond Bithumb itself, the episode has prompted broader discussions among regulators and legislators about imposing bank-like legal responsibilities on crypto exchanges. Officials are reportedly considering tougher rules that would align digital asset platforms more closely with traditional financial institutions in areas like reserve management, internal controls, and operational accountability.
As South Korea positions itself as one of Asia’s most active crypto markets, the outcome of the Bithumb investigation could set a precedent for how operational failures are punished - and prevented - going forward.
