South Korean regulators are under scrutiny after a major system failure at Bithumb exposed weaknesses in both internal controls and financial supervision. The incident involved an accounting error that temporarily reflected the distribution of 620,000 Bitcoin, far exceeding the exchange’s actual holdings of about 42,800 BTC.
Massive Credit Error During Promotion
The issue surfaced on February 6 during a promotional event when users were mistakenly credited with 2,000 BTC each instead of digital assets worth 2,000 won, approximately 1.38 dollars. The system recorded a total of 620,000 BTC as distributed, creating a discrepancy valued at roughly 1.3 billion dollars.
Despite multiple inspections by the Financial Services Commission and the Financial Supervisory Service in recent years, regulators failed to detect the vulnerability that allowed a single employee to execute large transfers without triggering safeguards.
Lawmakers, including Rep. Kang Min guk of the People Power Party and Rep. Han Chang min of the Social Democratic Party, criticized the oversight process, questioning whether past reviews were largely procedural and insufficiently rigorous. The Financial Supervisory Service has extended its investigation through February and is examining potential violations related to investor protection, anti money laundering compliance, and system management.
Bithumb CEO Lee Jae won acknowledged two previous smaller incidents that were later corrected, both of which are now under review.
Authorities, together with the Digital Asset eXchange Alliance, are also assessing internal controls at other major domestic exchanges, including Upbit, Coinone, Korbit, and GOPAX. The findings may influence upcoming industry guidelines and crypto related legislation.
Separate Case of Seized Bitcoin Recovered
In a separate incident reported by the Gwangju District Prosecutors’ Office, 320.8 BTC valued at about 40 billion won that had been seized in a criminal investigation went missing after prosecutors accidentally accessed a phishing site while checking a wallet. The funds were later returned on February 17, reportedly after the hacker failed to liquidate them.
The Bitcoin had originally been confiscated from individuals involved in operating an illegal overseas gambling platform between 2018 and 2021. Authorities continue to monitor domestic and international exchanges while tracking the hacker to prevent further security breaches.
