S Korea begins full inspection into Bithumb over bitcoin error

South Korea’s Financial Supervisory Service (FSS) has upgraded its investigation into a bitcoin misallocation at Bithumb to a full inspection, focusing on internal controls.

The regulator began the inspection on February 10, after an initial on-site check on February 7, which followed the discovery of a large-scale error.

The incident involved Bithumb mistakenly crediting 249 customers with about 620,000 bitcoins during a rewards event, due to an employee input error that inflated the amount to about 60 trillion won (US$41.2 billion).

Bithumb’s total bitcoin holdings are estimated at around 46,000, far less than the amount mistakenly allocated.

The FSS will examine how the digital assets were distributed despite the exchange’s holdings being insufficient.

🔗 Source: The Korea Herald

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Bithumb’s error created ‘ghost coins’ on its internal ledger

Bithumb’s internal ledger mistakenly credited users with about 620,000 bitcoins, far above its reserves of roughly 46,000 BTC, creating so-called “ghost coins” 1.
The mismatch stemmed from Bithumb comparing internal ledger entries with on-chain wallet balances once a day, a cadence critics call too slow for spotting abnormal transactions as they happen 2.
Before Bithumb froze the system, users sold about 1,788 bitcoins on the market, which drove volatility and pushed prices down by as much as 17% at one point 1.

The blunder puts South Korea’s crypto oversight and evolving rules under scrutiny

Regulators are using the legal principle of “unjust enrichment,” warning users who sold the assets that they may have to return the original bitcoin, not only its cash value, with an exception suggested for users who confirmed with Bithumb before selling 3.
The case is a high-profile trial under the Virtual Asset User Protection Act, which requires exchanges to hold assets matching user deposits, and FSS gov. Lee Chan-jin said inspection findings will shape the act’s second phase 3.
The Financial Supervisory Service plans inspections of internal controls at other crypto exchanges after the event 3.