- Bithumb mistakenly sent about $40 billion in bitcoin instead of small won rewards to 249 users, recovering most but not all of the funds.
- The exchange will cover $9 million in unrecovered bitcoin, offer 10% extra compensation to affected sellers, and faces regulatory inspection.
South Korean cryptocurrency exchange bithumb is under scrutiny after a major payout mistake during a promotional event led to tens of billions of Korean won being sent in Bitcoin instead of small cash rewards. The company has pledged to absorb $9 million in remaining losses with its own funds, while financial regulators have begun an on-site inspection of the platform’s systems and internal controls.
How a Promotional Event Turned Into a $40 Billion Bitcoin Error
The mishap originated in a marketing campaign designed as a lucky draw for selected customers. Bithumb’s promotions team planned to distribute a total of $423 in Korean won to 249 domestic users. The reward was supposed to be modest, but a configuration mistake changed the scale of the event dramatically.
When setting up the distribution, staff reportedly chose Bitcoin as the payment unit instead of Korean won. This input error meant that, in practice, each of the selected customers received Bitcoin worth thousands or even millions of dollars, rather than a small cash incentive. In total, about $40 billion worth of Bitcoin was mistakenly allocated to participants in the promotion.
The exchange reacted by halting trading soon after the error was identified. Most recipients were persuaded to return the unexpected Bitcoin windfall, but not all. Some users converted their allocations into other cryptocurrencies, such as Ethereum, or liquidated their holdings before the platform’s intervention could take effect.
Bithumb told South Korean newspaper Chosun Ilbo that 125 Bitcoin, worth around $9 million, has not been recovered from a small number of customers. According to reporting by TokenPost on February 8, the platform has decided to write off this amount and cover the loss itself.
Internal Systems, Regulatory Response, and Planned Safeguards
The incident has drawn a sharp response from South Korean financial authorities. Regulators have questioned how a single operational error could lead to such a large-scale misallocation of funds and have focused on the design of bithumb’s internal payment processes.
According to newspaper Kookmin Ilbo, officials from the Financial Supervisory Service began an on-site inspection of the exchange on February 7. As part of this review, investigators requested a list of employees who are authorized to issue cryptocurrency payments, reflecting concern about how much discretion staff hold in initiating transfers without additional checks.
Regulators have reportedly identified the exchange’s internal system for handling payouts as a key vulnerability. That system allowed employees to distribute loyalty points, Korean won, Bitcoin, and Ethereum without going through formal settlement procedures. Unnamed sources cited by Kookmin Ilbo described this setup as exposing “structural vulnerabilities” at the company, suggesting that process weaknesses, rather than a single individual’s mistake, underpinned the event.
In an internal email to staff, Hwang Seung-wook, Vice President of Bithumb’s Exchange Business Division, acknowledged the gravity of the situation. He wrote that the fact a single error in setting an event reward unit could destabilize the entire exchange highlighted the current state of its systems and procedures. Hwang stressed that the focus would be on tightening lax processes that failed to prevent such a mistake, rather than placing blame on a particular employee.
The exchange has indicated that it was already preparing additional safety mechanisms before the promotion misfire occurred. Nonetheless, regulators have been critical that a planned “fat finger” fail-safe system, intended to block incorrect payouts, had not yet been implemented. Bithumb now aims to introduce this fail-safe by the end of March, ensuring future promotional rewards cannot be sent in the wrong asset or denomination.
A further layer of protection is also scheduled. By the end of May, the exchange plans to deploy a separate tool designed to detect abnormal transactions automatically and block them without manual intervention. Together, these systems are intended to reduce the risk that operational mistakes or irregular activity could affect customer balances or market stability.
Customer Compensation and Market Impact on Bithumb
The erroneous Bitcoin distribution quickly affected trading conditions on the platform. As recipients sold or traded their unexpected holdings, the price of Bitcoin on bithumb dropped sharply, diverging from broader market levels. This created losses for users who sold during the period of abnormal pricing.
In response, the exchange has laid out a compensation plan for customers who were harmed by the sudden price shock. Users who sold Bitcoin at what the company described as “an abnormally low price at the time of the incident” will receive the full amount of their sale, plus an additional 10%. This measure is intended to restore affected positions as though the price disruption had not taken place, while providing a modest premium.
To further address user concerns and encourage continued trading activity, bithumb has also announced a temporary fee waiver. For seven days starting February 9, customers will be able to buy and sell coins on the platform without paying trading commissions. The combination of direct compensation and reduced costs is aimed at stabilizing the marketplace and retaining user confidence after the disruption.
The problematic promotion and its fallout come at a delicate moment for the exchange. Bithumb is pursuing a plan to become the first South Korean cryptocurrency trading platform to list in the United States this year. Just before the incident, South Korea’s consumer protection watchdog had opened an investigation into the company’s marketing claims, adding another layer of regulatory attention. The latest error, and the supervisory response it has triggered, now coincides with these broader oversight and listing ambitions.
Key takeaways
- A misconfigured event payout led to roughly $40 billion in Bitcoin being sent instead of $423 in Korean won to 249 users.
- Bithumb has not recovered 125 Bitcoin, about $9 million, and plans to cover this loss with company funds.
- The Financial Supervisory Service began an on-site inspection on February 7, focusing on internal payment controls.
- New systems to prevent fat finger errors and automatically block abnormal transactions are scheduled by the end of March and May.
- Users who sold Bitcoin at unusually low prices will receive full compensation plus 10%, and trading fees are waived for seven days from February 9.
Conclusion
The promotional error at bithumb has exposed significant weaknesses in its internal payout and control systems, leading to a multibillion-won misallocation and a sharp price disruption on the exchange. By agreeing to absorb $9 million in unrecovered Bitcoin and compensating users affected by abnormal trading prices, the company is attempting to limit customer impact and restore market normality. At the same time, intensified regulatory scrutiny, mandatory process reviews, and the accelerated rollout of new safeguards underscore the broader implications for the exchange as it pursues a U.S. listing and faces ongoing oversight of its marketing and operational practices.
Disclaimer
The information provided in this article is for informational purposes only and should not be considered financial advice. The article does not offer sufficient information to make investment decisions, nor does it constitute an offer, recommendation, or solicitation to buy or sell any financial instrument. The content is opinion of the author and does not reflect any view or suggestion or any kind of advise from cryptonewsbytes.com. The author declares he does not hold any of the above mentioned tokens or received any incentive from any company.
Featured image created by AI
