South Korea Delays Bithumb Probe After $43 billion Bitcoin Mishap
Seoul, 20 Feb 2026 – South Korean lawmakers are intensifying scrutiny of the nation’s crypto regulatory framework after leading exchange Bithumb erroneously credited customers with 2,000 BTC each during a promotional giveaway on 6 February. The blunder, which involved a total of roughly 620,000 BTC—worth an estimated $43 billion at current prices—triggered a brief but frantic wave of sell orders and reignited concerns over the supervision of the country’s rapidly expanding digital‑asset market.
What happened
Bithumb intended to reward participants with a modest cash prize of 2,000 won (approximately US$1.40). Due to a coding mistake, the system recorded the reward as 2,000 BTC per user, instantly inflating balances across thousands of accounts. The exchange later confirmed that it did not possess the advertised Bitcoin and was forced to reverse the transactions. While the majority of the mistakenly credited coins were recovered, 125 BTC (about US$8.6 million) remained unretrieved.
The incident sparked an immediate market reaction. Traders, fearing that the “ghost” Bitcoin could be liquidated, rushed to sell the affected accounts’ holdings, momentarily unsettling South Korea’s already volatile crypto market.
Regulatory response
The Financial Services Commission (FSC), South Korea’s primary financial regulator, opened a formal inspection into Bithumb on 10 February. Initially, officials pledged “stern legal actions” against any conduct that could jeopardize market order. The investigation was slated to wrap up by 13 February, but the FSC announced a delay, now targeting the end of the month for a final report. Regulators cited the need for additional review and the inclusion of two earlier, smaller payout errors in Bithumb’s operational history.
Bithumb’s chief executive, Lee Jae‑won, testified before an emergency National Assembly session on 11 February, acknowledging the previous incidents but emphasizing that the amounts involved were negligible compared to the current mishap.
Political backlash
Members of the opposition People Power Party, led by Representative Kang Min‑guk, have condemned the FSC for failing to detect systemic flaws in Bithumb’s internal controls despite at least three audits since 2022. “This is not a simple technical glitch,” Kang said. “It exposes structural weaknesses in the crypto ecosystem, from insufficient regulatory oversight to inadequate risk management by exchanges.”
Lawmakers are now urging the FSC to accelerate its probe and to consider tighter supervisory measures, including more frequent on‑site examinations and mandatory safeguards for custodial operations.
Wider context: repeated custody failures
The Bithumb episode adds to a growing list of high‑profile custody lapses involving South Korean authorities:
- 2021 – Gangnam Police cold‑wallet breach: Twenty‑two BTC, valued at roughly US$1.5 million at today’s prices, vanished from a police cold wallet during a nationwide audit.
- August 2025 – Gwangju prosecutors’ office: Three hundred twenty BTC were reported missing after a password leak. The funds were later recovered following a hacker’s voluntary return, but the incident raised questions about the security of government‑held digital assets.
These incidents have fueled criticism that South Korean agencies lack the technical expertise and procedural rigor required to safeguard digital‑asset holdings.
Analysis
The Bithumb mishap underscores several systemic challenges:
- Regulatory gaps: Existing oversight mechanisms have not kept pace with the speed of innovation in the crypto sector. The FSC’s delayed investigation suggests limited capacity to conduct swift, comprehensive reviews of exchange infrastructure.
- Operational risk at exchanges: Bithumb’s error reveals deficiencies in internal testing and change‑management processes. While the company managed to recover most of the phantom Bitcoin, the initial misallocation caused market turbulence and eroded user confidence.
- Custody vulnerabilities in public institutions: Repeated loss of Bitcoin from police and prosecutorial cold wallets indicates that governmental bodies are still grappling with best practices for secure digital‑asset storage.
Key takeaways
| Issue | Implication |
|---|---|
| Delayed regulatory probe | May prolong market uncertainty and diminish confidence in the FSC’s ability to enforce robust standards. |
| Repeated payout errors | Suggests that Bithumb’s internal controls need a comprehensive overhaul, potentially triggering stricter licensing conditions. |
| Historical custody failures | Highlight a broader need for a national framework governing the storage, audit, and recovery of digital assets held by public agencies. |
| Political pressure | Opposition parties are likely to push for legislative reforms, possibly expanding the FSC’s remit or introducing new oversight bodies. |
| Market reaction | Short‑term sell pressure demonstrated the market’s sensitivity to operational mishaps, reinforcing the importance of transparent communication from exchanges and regulators. |
Outlook
As the FSC finalizes its extended investigation, stakeholders anticipate recommendations that could include mandatory real‑time monitoring of exchange balances, heightened penalties for operational negligence, and the establishment of a dedicated crypto‑asset supervisory unit. For Bithumb, the episode may trigger an internal audit overhaul and potentially the appointment of external compliance advisors.
The broader crypto community in South Korea will be watching closely. An effective regulatory response could restore confidence and solidify the country’s reputation as a leading hub for digital‑asset innovation. Conversely, continued delays or insufficient action may exacerbate concerns about systemic risk and hinder the sector’s growth.
Reporting by [Your Name]; edited by [Editor’s Name].
Source: https://cointelegraph.com/news/south-korea-fsc-delay-bithumb-probe-bitcoin-error?utm_source=rss_feed&utm_medium=feed&utm_campaign=rss_partner_inbound
