South Korean crypto exchange Bithumb has begun legal action to recover bitcoin distributed in error during a February promotional event, escalating a dispute with a small group of users who have refused to return the funds.
According to a report from local outlet Chosun Biz, the exchange has filed for a provisional seizure to freeze accounts holding roughly 7 BTC, valued near $500,000. The measure allows a court to secure assets before a civil lawsuit proceeds and signals that formal litigation may follow.
The incident traces back to Feb. 6, when Bithumb intended to distribute 620,000 Korean won in rewards to 249 users. A staff member entered “BTC” instead of “KRW,” triggering the system to credit accounts with 620,000 bitcoin on internal ledgers. The error briefly created the appearance of more than $40 billion in bitcoin balances on the platform.
Within minutes, some users sold portions of the credited assets or exchanged them for other cryptocurrencies before the exchange halted activity. The sudden surge in apparent supply caused the bitcoin-KRW trading pair on Bithumb to drop by about 15%, leading to losses for other traders.
An outstanding 12.3 billion won worth of bitcoin from Bithumb
Bithumb moved to reverse the transactions and has since recovered most of the funds. At one stage, about 12.3 billion won worth of bitcoin remained outstanding. That figure has now narrowed to seven bitcoin after months of outreach to affected users.
While many recipients returned the funds after being contacted, others have declined, arguing that the error originated with the company and does not require repayment. Legal experts in South Korea have taken a different view, describing the case as one of unjust enrichment, which requires recipients of mistaken transfers to return the assets.
If the case proceeds to court, users who sold the bitcoin may face additional financial exposure. Under restitution principles, they could be required to repurchase bitcoin at current market prices to return the equivalent amount, creating potential losses if prices have risen since the incident.
The episode has drawn scrutiny from regulators and lawmakers, who have questioned how the exchange executed transactions tied to non-existent balances. At the time of the error, Bithumb reportedly held far less bitcoin than the amount reflected in the mistaken distribution.
The incident has also affected Bithumb’s corporate plans, with the company delaying its anticipated initial public offering to 2028.
Bithumb has stated that it will compensate affected traders at 110% of losses linked to the price disruption and implement stronger internal controls. The exchange also plans to establish a protection fund to address future incidents.