South Korea’s crypto exchange Bithumb faces scrutiny after an internal error led to the accidental distribution of hundreds of thousands of Bitcoin during a promotional event.
South Korea’s major cryptocurrency exchange Bithumb is facing intense scrutiny after a serious internal error led to the mistaken distribution of a huge amount of Bitcoin to hundreds of users. The incident has raised concerns about system controls, internal approval processes, and the overall safety of virtual asset platforms.
According to financial authorities and industry sources, the error resulted in the transfer of digital assets worth roughly 60 trillion won. The scale of the mistake has shocked both regulators and investors, especially since the amount far exceeded the exchange’s actual Bitcoin holdings.
What Triggered the Incident
The problem occurred during a promotional event known as the “random box” airdrop. This event, which has been running since 2024, allows users to open a virtual box and receive rewards. The rewards are normally small cash amounts ranging from 2,000 won to 50,000 won and are designed to attract new customers.
On the evening of February 6, at around 7:00 PM, a critical input error occurred while rewards were being distributed. Instead of assigning a reward of 2,000 won per user, the system mistakenly set the reward unit as Bitcoin. As a result, 2,000 Bitcoin were sent to each eligible user. In total, 294 users received the incorrect payout. This led to a combined distribution of approximately 620,000 Bitcoin, an amount that Bithumb did not possess.
Delay in Detection and Market Impact
Bithumb reportedly became aware of the issue about 20 minutes after the transfers were made. By the time the exchange moved to freeze affected accounts, some users had already started selling the mistakenly received Bitcoin.
Roughly 1,786 Bitcoin were sold before trading activity could be fully halted. This sudden surge of supply caused Bitcoin prices on the Bithumb exchange to drop sharply. The price fall triggered panic among other investors, some of whom rushed to sell their holdings to avoid further losses. Bithumb later estimated that investors who sold during the price drop suffered losses totaling around 1 billion won.
Recovery Efforts and Current Status
In a public update, Bithumb said that by 4:00 AM on February 7, it had recovered 618,214 Bitcoin. This accounted for about 99.7 percent of the incorrectly distributed assets that had not yet been traded. The exchange also reported that around 93 percent of the Bitcoin that had already been sold was recovered through follow-up measures.
While most assets were returned, the incident still caused financial harm to some investors and damaged confidence in the platform. The company stressed that the estimated investor losses were calculated based on actual losses during price fluctuations, not on the total value of the mistaken distribution.
System Failures Raise Serious Concerns
One of the most troubling aspects of the incident is that Bithumb’s systems failed to flag the abnormal transaction. At the time of the error, the exchange reportedly held fewer than 50,000 Bitcoin. Despite this, the system treated the transfer of 620,000 Bitcoin as a normal transaction.
Critics point to weaknesses in Bithumb’s cold wallet structure. Cold wallets store most assets offline for security reasons. When assets are withdrawn from these wallets, the transaction is first recorded in the exchange’s internal database, while the actual blockchain transfer occurs later.
During this process, the system allowed reward payouts far beyond the exchange’s real holdings. The fact that such a large transaction passed through with only a single approval has drawn strong criticism from industry experts.
Regulatory Response and Official Reaction
Financial authorities reacted quickly to the situation. An emergency response team was formed the following afternoon to assess the risks and potential damage to users. Kwon Dae-young, Vice Chairman of the Financial Services Commission, described the incident as a serious warning sign for the virtual asset industry. He said the case revealed clear weaknesses and risks in the management of digital assets.
The Financial Supervisory Service has been instructed to review user losses and assess whether existing safeguards were properly implemented. Authorities also plan to conduct inspections of other cryptocurrency exchanges to examine their asset holdings, operational practices, and internal control systems.
Bithumb’s Plans to Prevent Recurrence
In response to the incident, Bithumb announced several internal reforms. The company plans to activate a company-wide crisis management system led directly by top executives. The goal is to prevent similar errors from happening again.
An Investor Damage Relief Task Force will also be set up to support affected users. This team will go beyond basic compensation and focus on restoring trust and handling claims in a more structured and transparent way. Bithumb said it will hold an extraordinary board meeting to share details about the incident, review the actions taken so far, and decide on additional measures to strengthen internal controls.
CEO Apologizes and Accepts Responsibility
Bithumb CEO Lee Jae-won issued a public apology, acknowledging the seriousness of the mistake. He said he feels a heavy sense of responsibility and promised that customer trust would take priority over rapid business growth. Lee added that the company is committed to building a safer trading environment and improving systems to ensure users can trade with confidence in the future.
A Wake-Up Call for the Crypto Industry
The Bithumb incident has become one of the most high-profile operational failures in South Korea’s cryptocurrency market. It highlights how a simple input error, combined with weak safeguards, can create massive financial risks.
As regulators step up oversight and exchanges review their systems, the case is likely to shape future rules and expectations for how virtual asset platforms manage user funds and internal approvals.
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