Bithumb Faces Government Investigation After $40 Billion Bitcoin Distribution Error
Date: 2026-02-07
The incident unfolded on February 6 when what should have been a routine marketing event turned into one of the most significant exchange errors in cryptocurrency history. Users participating in Bithumb's "Random Box" promotion expected modest rewards between 2,000 and 50,000 Korean won (approximately $1.50 to $38). Instead, a catastrophic input error resulted in participants receiving 2,000 Bitcoin each—worth roughly $139 million per recipient at the time.
The scale of the mishap is staggering. Analysis suggests that approximately 695 users purchased the promotional boxes, with 240 successfully claiming their rewards before the exchange recognized something had gone terribly wrong. The total value of the erroneous distribution exceeded 60 trillion Korean won, or approximately $40 billion, marking it as the largest accidental cryptocurrency disbursement ever recorded in South Korea.
Within minutes of the error, recipients began liquidating their unexpected windfall. The massive sell pressure overwhelmed Bithumb's order books, triggering what market analysts have described as a "reverse Kimchi premium"—a rare phenomenon where Korean Bitcoin prices fell dramatically below global levels rather than trading at their traditional premium. Bitcoin plunged from 98 million won to approximately 81 million won on the platform, representing a precipitous 17% decline that occurred in isolation from international markets.
Bithumb's internal monitoring systems flagged the anomaly within eight minutes of the initial distribution, prompting the exchange to freeze deposits and withdrawals at 7:40 PM local time. However, by that point, damage had already been done. Reports indicate users managed to withdraw approximately 3 billion won (roughly $2.1 million) before the platform could implement full trading restrictions.
The exchange moved quickly to contain the crisis. According to Bithumb CEO Lee Jae-won, the company has successfully recovered 618,212 BTC—representing 99.7% of the total erroneous distribution. Additionally, 93% of the Bitcoin that recipients had already sold has been reclaimed, with the exchange confirming that none of the mistakenly distributed assets left the platform.
"We feel a deep sense of responsibility for failing to uphold the top priorities of a virtual asset exchange: stability and integrity," Lee stated in an official apology issued following the incident.
South Korea's Financial Supervisory Service (FSS) and the Financial Services Commission have now opened formal investigations into the matter. FSS Governor Lee Chan-jin convened an emergency response meeting on the morning of February 7 to assess the situation. Regulators are examining potential violations of financial regulations, evaluating the exchange's customer protection measures, and determining what systemic failures allowed such an error to occur.
The timing is particularly problematic for Bithumb, as the platform was already under scrutiny by the Korea Fair Trade Commission. Investigators visited the exchange's Gangnam headquarters just days before the Bitcoin distribution error to examine whether the company's liquidity marketing claims were misleading. Bithumb has long promoted itself as having "the highest level of liquidity in the domestic crypto exchange sector"—a claim now being questioned in light of the 10% price crash triggered by sudden selling pressure.
Bithumb has announced comprehensive compensation measures for affected customers. Users who sold Bitcoin at depressed prices during the panic will receive 110% reimbursement—covering their full losses plus an additional 10%. All customers who accessed the platform during the incident will receive 20,000 Korean won ($15), and the exchange has waived trading fees for a seven-day period.
Perhaps most significantly, Bithumb has established a permanent Customer Protection Fund worth 100 billion Korean won (approximately $68 million) specifically designed to address potential future incidents. The company has also pledged to implement enhanced security protocols, including multi-step payment approvals, improved asset verification systems, and AI-powered monitoring for abnormal transaction detection that operates around the clock.
The exchange has been emphatic in clarifying that the incident resulted from internal human error rather than external threats. "This incident was not caused by hacking or a security breach," Bithumb's official statement emphasized, noting that customer assets remained secure throughout the crisis.
Nevertheless, the error has reignited discussions about the operational risks inherent to centralized cryptocurrency exchanges. Industry analysts point to the incident as evidence that even major platforms with millions of active users can experience catastrophic failures from seemingly mundane administrative processes. Bithumb maintains approximately 2.42 million monthly active users and ranks as South Korea's second-largest cryptocurrency exchange, trailing only Upbit in market share.
The broader cryptocurrency market context adds another layer of complexity to the situation. The Bithumb incident occurred during a period of significant volatility, with Bitcoin having fallen to its lowest levels since October 2024. Global markets saw approximately $2.28 billion in total cryptocurrency liquidations over a 24-hour period surrounding the incident, with Bitcoin specifically accounting for $1.7 billion in forced position closures.
As investigations continue, the incident serves as a sobering reminder of the challenges facing cryptocurrency infrastructure. While blockchain technology itself may be secure and immutable, the centralized platforms that facilitate most trading remain vulnerable to human error, operational failures, and the cascading market effects that can result from such mistakes.
Bithumb has pledged full transparency throughout the regulatory review process and has committed to publicly disclosing all follow-up measures as the investigation progresses. For now, the exchange reports that normal trading operations have resumed, though affected accounts remain under enhanced monitoring protocols.
The coming weeks will likely prove critical for Bithumb as regulators determine whether additional penalties or operational restrictions are warranted. Given the unprecedented scale of the error and the exchange's prominent position in South Korea's cryptocurrency ecosystem, the outcome of this investigation could have lasting implications for regulatory oversight of digital asset platforms throughout the region.
