South Korea’s Financial Supervisory Service (FSS) has opened a full investigation into crypto exchange Bithumb after an operational mistake led to the accidental distribution of 620,000 BTC, worth about $43.1 billion at the time. The error took place on February 6, when a staff member entered Bitcoin instead of Korean won in a promotional giveaway process.
The mistaken payout exceeded Bithumb’s reported reserves
The FSS had initially planned a routine inspection of the exchange. That changed quickly once the scale of the incident became clear. Regulators are now examining how Bithumb was able to distribute an amount of Bitcoin far above what it reportedly held. At the time, the exchange’s reserves were said to be around 46,000 BTC, leaving a large gap between the mistaken payout and the assets on hand.
Bithumb moved to recover the funds and said it retrieved 99.7% of the mistakenly distributed Bitcoin. During the confusion, users reportedly sold 1,788 BTC. The exchange has since recovered 93% of those assets, though 125 BTC remain unaccounted for. Bithumb has said it will compensate affected users at 110% of their losses.
Internal controls and market trust are under scrutiny
The incident has sharpened concerns in South Korea over the operational reliability of crypto exchanges. Critics argue that an error of this size could damage confidence in trading platforms and spill into broader market stability. Some lawmakers have warned that a failure on this scale could trigger a bank-run-like situation. Questions have also been raised over whether Bithumb effectively distributed Bitcoin it did not actually own, a point that could deepen trust issues around the platform.
Political pressure is building as well. South Korea’s ruling Democratic Party has called for tighter regulation of crypto exchanges and proposed capping individual ownership stakes in exchanges at 15% to 20%. The proposal is being viewed as part of a broader response to weaknesses exposed by the Bithumb case.
South Korea weighs bank-level standards for exchanges
Financial authorities are also studying new legal frameworks that could place crypto exchanges under standards similar to those applied to traditional financial institutions. That would bring stricter oversight of internal controls, compliance, and operating procedures. The investigation into Bithumb is still underway, and its outcome may shape how South Korea rewrites the rules for local exchanges.