TL;DR
- Bithumb mistakenly credited roughly 620K in Bitcoin to user balances on its internal ledger due to an accounting error.
- South Korean regulators are investigating the incident.
- Although the balances existed only within Bithumb’s systems, some users briefly withdrew real Bitcoin before controls intervened, leading the exchange to seek the return of the funds.
South Korea’s regulators have launched an investigation into Bithumb after a configuration error led to the erroneous crediting of Bitcoin balances worth more than $40 billion. While the incident did not involve a hack or permanent loss of customer funds, authorities say it exposes serious weaknesses in exchange-level risk controls and internal accounting systems.
How an internal system failure created false Bitcoin balances
The problem originated from what Bithumb described as a configuration failure within its accounting infrastructure. In effect, an internal system error caused Bitcoin balances to be recorded inaccurately on the exchange’s internal ledger.
In market terms, the erroneous balances were valued at more than $40 billion. Measured in Bitcoin, Bithumb’s error amounted to roughly 620,000 BTC, which would represent just over 3% of the circulating supply.
Now, those Bitcoins did not exist as real holdings. Neither the exchange nor any of its users ever held them. The amounts existed only as internal ledger entries that appeared valid inside Bithumb’s systems before reconciliation checks flagged the anomaly.
>>> Read more: South Korea Reopens Corporate Access To Crypto Investment
When the accounting issue became a withdrawal risk
The situation worsened when the internal accounting issue translated into a withdrawal problem. For a short period, some of the incorrect balances were treated as eligible for withdrawal.
During that window, a limited number of users were able to withdraw real Bitcoin from Bithumb-controlled wallets. Once broadcast to the blockchain, those transfers became final and irreversible.
Bithumb halted withdrawals and froze affected accounts shortly after identifying the issue.
Why Bithumb asked users to return mistakenly transferred Bitcoin
Because real Bitcoin had already left the exchange, Bithumb contacted affected users and asked them to return the assets. The exchange told users the transfers occurred due to a system failure and without legal entitlement.
Regulators later confirmed that most of the Bitcoin was recovered after users returned the funds. The recovery relied on cooperation, as blockchain transactions cannot be undone.
This recovery process became a central element of the Bithumb investigation, even though the exchange did not report any permanent customer losses.
South Korea launches investigation into Bithumb
South Korea’s financial authorities opened a formal investigation into the incident, treating it as an operational breakdown, given that there were no signs of market abuse. Officials said the review forms part of a broader investigation into whether South Korea’s crypto exchanges maintain sufficient internal safeguards.
The inquiry is examining accounting controls, withdrawal authorization systems, and escalation procedures to understand how an internal error progressed to an actual external settlement. Regulators said the absence of permanent customer losses did not reduce the seriousness of the case, warning that similar control failures under different conditions could result in far more significant losses.
>>> Read more: Upbit Suspension Looms Over 700K KYC Violations
What comes next for Bithumb and crypto regulation in South Korea
The investigation remains ongoing, with regulators assessing whether additional safeguards or compliance measures are required. Bithumb has said it is reviewing internal processes and strengthening controls following the incident.
While no permanent customer losses were reported, regulators have pointed to the case as an example of how internal system failures at centralized exchanges can result in real asset movements. As exchanges grow larger and more complex, the episode will surely influence future discussions around crypto regulation in South Korea, particularly standards for operational resilience at systemically important platforms.
