What To Know:
- South Korea’s financial regulator called the Bithumb mistaken transfer incident a ‘disaster’ and said it has shaken trust in the entire virtual asset exchange sector.
- Authorities have launched an on-site inspection and warned that confirmed illegality could lead to fines, business suspensions, or even licensing action under current and upcoming laws.
- The case has intensified scrutiny of internal ledger-based transactions, with regulators signaling broader reforms to prevent the trading of non-existent virtual assets.
South Korean financial regulators have issued strict warnings to the crypto industry after the mistaken Bitcoin transfer incident at Bithumb. Eun Sung-soo, head of the Financial Supervisory Service, described the episode as a “disaster” that undermines confidence in crypto exchanges. He said that authorities are ready to take all measures permitted under existing law if wrongdoing is confirmed.
At the ‘2026 Major Business Plan Briefing’ held at the Financial Supervisory Service headquarters in Seoul, Eun said regulators had already launched an on-site inspection after receiving reports of the incident. He added that the probe could turn into a full-scale investigation if illegal conduct is identified. According to him, the case goes beyond a simple operational error and strikes at the credibility of the entire crypto trading system.
Eun focused particular attention on what he described as “book transactions,” internal ledger-based trades that do not immediately settle on the blockchain. Even as such transactions are commonly used by exchanges to process trades quickly and reduce fees, he said the Bithumb case exposed serious weaknesses in internal controls. The most troubling aspect, he noted, was that digital assets the exchange did not actually possess were able to be transferred and traded.
Bithumb’s 2000 Bitcoins Reward Glitch
As of September last year, Bithumb reportedly held 175 bitcoins internally, while customers had entrusted 42,619 bitcoins to the platform, for a combined total of 42,794. Yet the mistaken transfer involved around 620,000 bitcoins, more than 14 times the exchange’s total holdings. This implies that roughly 580,000 bitcoins existed only as accounting entries rather than real assets.
Local media reports say the incident occurred when Bithumb mistakenly paid 2,000 Bitcoins instead of 2,000 won to 249 customers as part of an event reward. In total, about 620,000 bitcoins were distributed, i.e., roughly 61 trillion won based on prices at the time. Bithumb detected the error within 20 minutes and immediately halted trading and withdrawals. Even so, about 125 bitcoins, worth nearly 12.9 billion won, had already been sold. Authorities say the remaining 99.7% have since been recovered.
Eun stressed that the issue was not the use of ledger-based transactions themselves, which are legal and widely adopted across the industry. The core failure, he said, was the absence of safeguards to prevent transfers of non-existent assets. He added that regulators are now reviewing the internal systems of other exchanges as well, signaling that the investigation could have sector-wide implications.
Bithumb has maintained that the incident resulted from an error by an event manager. The company has said most of the transferred bitcoins were recovered and that affected customers received compensation. It also noted that discussions are ongoing regarding the recovery of approximately 3 billion won that appears to have already been cashed out.
Eun rejected claims that crypto exchanges operate in a regulatory blind spot, stating that the current Virtual Asset User Protection Act already allows for penalties including fines and business suspensions.
He said, once the proposed Digital Assets Basic Law is enacted, regulators could be given even larger regulatory powers, which also includes the ability to take action at the licensing level.
A case like Bithumb has also raised public calls for the Digital Assets Basic Law to have strong provisions for handling internal control failures that put customer assets at risk. If exchanges do not strengthen internal bookkeeping systems, the resulting penalty could lead to loss of operating licenses under such a framework. Information systems must be strengthened as a priority, Eun warned, adding that similar incidents in the future could carry severe consequences. He did not point to particular penalties while the probe is still being conducted, but confirmed that the presence of a confirmed illegality would lead to a forceful response.
