South Korea Probes $43B Bithumb Bitcoin Error, Regulatory Gaps

The incident, which occurred earlier this month, began as a routine promotional event on the Bithumb exchange. The platform intended to credit approximately 695 users with 2,000 Korean won, equivalent to about $1.38. Instead, a catastrophic system error credited each user with 2,000 Bitcoin, creating a total accounting discrepancy of $43 billion. While the error was confined to Bithumb’s internal ledgers and rectified within five minutes, its impact was immediate and severe.

Some users noticed the windfall and began selling the erroneously credited Bitcoin, causing a flash crash on Bithumb’s platform where the price of the asset plummeted to around $55,000. According to the exchange, it managed to recover approximately 99.7% of the distributed Bitcoin. However, the remaining 0.3%, valued at about $123 million, was sold and had to be repaid using company assets, resulting in a direct loss exceeding $100 million for the firm.

The scale of the error prompted swift action from Korean regulators, but it has also drawn intense political fire. Lawmakers are now questioning why the nation’s top financial watchdogs—the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS)—failed to identify the structural flaw in Bithumb’s systems. A local report from The Korea Times revealed that both agencies had reviewed Bithumb’s operations at least three times since 2022, yet never uncovered the input issue that led to the billion-dollar mistake.

“The episode is not merely a technical mishap but a case that lays bare deeper structural weaknesses in the virtual asset market, including complacent supervision and gaps in regulation,” said Rep. Kang Min-guk Kang. Another representative criticized regulators for attempting to shift blame onto the exchange “despite their supervisory role.” In response, the FSS launched a formal investigation, which has recently been granted an extended deadline until the end of the month. This probe will also examine two previous minor coin distribution errors at Bithumb that CEO Lee Jae-won disclosed before the National Assembly.

Facing a crisis of confidence, Bithumb moved quickly to mitigate the damage and compensate affected users. The exchange provided a compensation plan, paying around 20,000 won ($13.73) to any user logged in during the error. Crucially, it also reimbursed users who sold Bitcoin at the artificially low price triggered by the flash crash, adding a 10% premium on top of their losses. In a blog post on February 8, CEO Lee Jae-won stated, “We will never forget that the value of Bithumb’s future growth lies solely in the trust of our customers. Bithumb will continue to protect our customers’ assets with the utmost safety under any circumstances.”

The incident arrives at a volatile time for Bitcoin, which remains down approximately 46% from its all-time high of $126,080, though it recently traded around $67,752. For South Korea’s financial authorities, the Bithumb debacle has become a defining case study. Regulators themselves have acknowledged the event revealed “fundamental weaknesses” and “regulatory blind spots” that must be addressed. As the FSS investigation continues, the outcome will likely influence future crypto oversight frameworks, determining how the nation balances innovation with investor protection in its rapidly evolving digital asset market.