Bithumb Reveals System Flaws Caused $40 Billion Error in South Korea’s Crypto Exchange

South Korea’s Bithumb announced on Wednesday that significant flaws in its internal system had made the crypto exchange vulnerable to potential sabotage. This failure also led to an erroneous transfer of over $40 billion in assets just last week.

The country’s second-largest virtual asset exchange revealed that it mistakenly distributed approximately 620,000 bitcoins to customers during a promotional event, instead of the intended 620,000 won (around $426). This blunder triggered a dramatic 17% drop in bitcoin’s price.

Bithumb’s CEO, Lee Jae-won, explained that the giveaway represented 15 times the exchange’s actual holdings of 42,000 bitcoins. The issue arose due to a processing lag of about 24 hours, which delayed updates to the balance of virtual assets.

“We are acutely aware of the deficiency in internal system control,” Lee stated during a parliamentary committee hearing on the incident held on Friday.

The exchange’s policy, which was supposed to verify the volume of currency to be transferred against its actual holdings, failed. Additionally, the amount was not set aside in a separate account to ensure the transaction’s safety, according to Lee.

While most of the bitcoins have been retrieved by the exchange, regulators reported that 1,786 bitcoins had already been sold within minutes before the exchange could freeze the accounts of the customers who received them. Those customers are now legally obligated to return the funds.

Members of parliament expressed their dismay at the apparent failures in both government and corporate oversight within the country’s virtual assets market, which ranks among the most active globally by trading volume.

Financial Supervisory Service (FSS) Governor Lee Chan-jin emphasized that he believes the virtual currency market should be regulated similarly to banks and other financial institutions. However, he noted that current laws and regulations do not allow for such oversight.

(Current exchange rate: $1 = 1,455.4700 won)

(Reporting by Jack Kim; editing by Ed Davies and Sonali Paul)

South Korea’s Bithumb announced on Wednesday that significant flaws in its internal system had made the crypto exchange vulnerable to potential sabotage. This failure also led to an erroneous transfer of over $40 billion in assets just last week.

The country’s second-largest virtual asset exchange revealed that it mistakenly distributed approximately 620,000 bitcoins to customers during a promotional event, instead of the intended 620,000 won (around $426). This blunder triggered a dramatic 17% drop in bitcoin’s price.

Bithumb’s CEO, Lee Jae-won, explained that the giveaway represented 15 times the exchange’s actual holdings of 42,000 bitcoins. The issue arose due to a processing lag of about 24 hours, which delayed updates to the balance of virtual assets.

“We are acutely aware of the deficiency in internal system control,” Lee stated during a parliamentary committee hearing on the incident held on Friday.

The exchange’s policy, which was supposed to verify the volume of currency to be transferred against its actual holdings, failed. Additionally, the amount was not set aside in a separate account to ensure the transaction’s safety, according to Lee.

While most of the bitcoins have been retrieved by the exchange, regulators reported that 1,786 bitcoins had already been sold within minutes before the exchange could freeze the accounts of the customers who received them. Those customers are now legally obligated to return the funds.

Members of parliament expressed their dismay at the apparent failures in both government and corporate oversight within the country’s virtual assets market, which ranks among the most active globally by trading volume.

Financial Supervisory Service (FSS) Governor Lee Chan-jin emphasized that he believes the virtual currency market should be regulated similarly to banks and other financial institutions. However, he noted that current laws and regulations do not allow for such oversight.

(Current exchange rate: $1 = 1,455.4700 won)

(Reporting by Jack Kim; editing by Ed Davies and Sonali Paul)