South Korean exchange's $40B Bitcoin mistake casts pall over country's fledgling crypto legislation — staffer fat-fingered 620,000 BTC instead of Korean Won
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A couple days ago, South Korean crypto outfit Bithumb ran a promotion distributing small amounts of cash for engagement. Eligible folks could get prizes from a total pool worth a combined 620,000 ₩, about $425. The problem: a staffer input 620,000 BTC into the promotion instead, causing a $40 billion problem, granting millions to multiple people temporarily, and causing the exchange's BTC/KRW exchange pair to drop 17%.
The incident lasted 30 minutes and was contained to Bithumb's internal database, as by definition, the blockchain doesn't allow for currency to appear out of thin air. However, the fact that it was even possible for an exchange to issue 15 times its holdings (naked short selling) raised more than a few eyebrows, particularly in the South Korean financial world, where cryptocurrency trading is partially legislated and close to becoming fully legalized.
According to Reuters, Bithumb ended up reversing the transactions and recovered 99.7% of the issued BTC. South Korean law (paraphrased) states that people given funds out of nowhere are legally obligated to return them. That was the case with the vast majority of giftees, and Bithumb has legal standing to sue people who don't return the funds. Those who contacted the exchange for confirmation before withdrawing may be able to contest the claw-back.
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The exchange is reportedly still tracking the "small" portion of BTC that were withdrawn or converted to other currencies, apparently to the tune of $9 million. Furthermore, Bithumb is offering compensation to those who sold BTC during the internal crash, with traders getting the full difference of their orders plus a 10% apology bonus.
South Korean's crypto trading landscape is undergoing a legalization phase, as January 2026 marked the lift of a nine-year ban on public companies investing in crypto assets (with some limitations), as well as the recognition of blockchain-bases securities as financial instruments. There are even upcoming laws for spot crypto ETFs and KRW-pegged stablecoins.
The incident drew comment from Lee Chan-jin, governor of the country's Financial Supervisory Service, who called for added regulatory mechanisms to prevent incidents like Bithumb's, and pointed out that the timing for this event is particularly unfortunate. He reportedly went on to state that the issue of naked selling (or "ghost coins") needs to be fixed in order for cryptocurrencies to be fully comparable to legacy assets.
A devil's advocate may argue that naked short selling is part and parcel of the stock exchange world, and allowed in the U.S with arguably tame consequences. South Korea, China, and the European union, have all made practice illegal. Bithumb and other exchanges are considered brokers and subject to specific naked-sale laws and required to hold over 100% of customer deposits, but this incident highlighted how the current detection mechanisms can fail, as they don't get triggered until an withdrawal or an audit occurs.
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Regardless of the currency or lack thereof (e.g. Liquid assets such as futures contracts), exchanges always have been and always will be vulnerable to fat-fingering. E.g. A $100m whoopsie, a near >$600 Billion misclick, a $35 billion transfer (more than the bank held, etc. Some reversed, some not.
