South Korea's FSS investigates Bithumb after a $43.1 billion Bitcoin distribution error, with significant political and market implications.
South Korea's Financial Supervisory Service (FSS) has launched a comprehensive investigation into Bithumb, prompted by a significant error that led to the erroneous distribution of 620,000 BTC, valued at approximately $43.1 billion. This incident, first reported by Yonhap, occurred during a promotional event on February 6, when an employee mistakenly designated Bitcoin instead of the Korean won as the reward.
At that time, Bithumb's actual reserves were only around 46,000 BTC, making the distribution far exceeding its holdings. Consequently, the incident caused a 15% decline in Bitcoin's price on the exchange.
Bithumb has since reported recovering 99.7% of the mistakenly distributed Bitcoin, with about 125 BTC still unrecoverable. The exchange has committed to compensating affected clients at 110% of their losses and plans to enhance internal control measures. Additionally, it will implement a user protection fund worth 100 billion won ($68 million).
Political Fallout
The situation has sparked criticism from lawmakers, particularly from Representative Na Kyun Won, who emphasized the risks posed by trading "non-existent assets." She raised concerns that exchanges could manipulate their internal records without actual fund movement on the blockchain, jeopardizing market stability.
“If an exchange simply changes numbers in its internal registry without any actual movement of funds on the blockchain, it means they are selling Bitcoin they do not own,” she declared.
In response to the fallout, the ruling Democratic Party of South Korea is considering capping individual shareholder stakes in crypto exchanges to 15-20%, a move that has faced opposition due to concerns over potential market stagnation. Furthermore, financial authorities are evaluating the introduction of legal obligations for cryptocurrency platforms akin to those enforced on traditional financial institutions.
Notably, Bithumb's parent company, Bithumb Holdings, faced its own issues in recent years, with former CEO Ahn Sung-hyun convicted of fraud in 2024, as investigations into former director Kim Dae-sik continued into 2025.
