South Korean Authorities Under Fire over $43B Bithumb Bitcoin Error
•February 20, 2026
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Companies Mentioned
Why It Matters
The incident exposes systemic weaknesses in South Korea’s crypto regulatory framework, risking market confidence and investor protection. Prompt corrective action is essential to sustain the nation’s fast‑growing digital‑asset sector.
Key Takeaways
- •Bithumb credited 620,000 BTC instead of 2,000 KRW each
- •FSC inspection delayed, now ends end of February
- •Only 125 BTC remain unrecovered after recovery effort
- •Repeated payout errors raise doubts on South Korean crypto oversight
Pulse Analysis
South Korea’s cryptocurrency market, valued at over $50 billion, has long been a showcase of rapid adoption paired with stringent oversight. The Bithumb mishap underscores how even leading exchanges can falter under complex promotional mechanics, revealing gaps in internal controls that regulators have struggled to monitor. While the country’s Financial Services Commission has instituted multiple inspections since 2022, the sheer scale of the error—620,000 BTC mistakenly issued—suggests that existing audit frameworks may lack the depth needed for real‑time risk detection.
The immediate market reaction was swift: a short‑lived sell‑off as traders attempted to liquidate the erroneously credited Bitcoin. Bithumb’s rapid response, recovering the majority of the phantom assets, limited systemic fallout, yet 125 BTC (approximately $8.6 million) remain unrecovered, highlighting the challenges of reversing blockchain transactions once they enter the public ledger. This incident also revives scrutiny over past payout anomalies and high‑profile custodial losses, such as the vanished police‑station cold wallet, reinforcing the narrative that operational resilience remains an industry‑wide concern.
Looking ahead, the extended FSC investigation—now slated for completion by month’s end—could catalyze tighter licensing standards, mandatory real‑time monitoring, and clearer accountability mechanisms for crypto firms. For investors, the episode serves as a cautionary tale about the importance of due diligence and the potential volatility introduced by regulatory lapses. Strengthened oversight may restore confidence, but it will require coordinated policy action, industry best‑practice adoption, and transparent communication to ensure South Korea retains its competitive edge in the global digital‑asset arena.
South Korean authorities under fire over $43B Bithumb Bitcoin error
South Korean lawmakers pressure regulators after Bithumb Bitcoin error
South Korean lawmakers are stepping up pressure on financial regulators after crypto exchange Bithumb mistakenly credited customers with Bitcoin it did not hold, an error that briefly sparked a rush to sell and renewed questions about oversight of the country’s fast‑growing digital‑asset market.
Lawmakers said the Financial Services Commission (FSC) failed to detect critical flaws in Bithumb’s internal systems despite at least three inspections since 2022, The Korea Times reported Thursday.
Representative Kang Min‑guk of the main opposition People Power Party said the incident was more than a technical mishap, claiming structural weaknesses in the crypto market, including gaps in regulation and oversight.
Bithumb mistakenly credited 2,000 Bitcoin per user instead of 2,000 Korean won ($1.40) during a promotional event on Feb. 6, distributing a total of 620,000 BTC that the exchange did not actually hold.
FSC delays probe into Bithumb, intensifying accusations
Lawmakers’ criticism of the FSC intensified as the regulator delayed its inspection of Bithumb. The authority opened the investigation on Feb. 10, with FSC officials emphasizing they would take “stern legal actions against acts that harm the market order.”
The probe, initially expected to conclude Feb. 13, has been extended, with officials aiming to complete it by the end of February, citing a need for additional review, multiple local publications reported.
Bithumb CEO cites two prior payout incidents
The FSC’s inspection of Bithumb reportedly covers not only the recent 620,000 BTC error, but also two similar incidents in the past.
“There were two previous cases in which coins were mistakenly paid out and later recovered, but the amounts were minimal,” Bithumb CEO Lee Jae‑won said during an emergency National Assembly session on Feb. 11.
From left: FSC vice chairman Kwon Dae‑young, FSC Governor Lee Chan‑jin and Bithumb CEO Lee Jae‑won during a National Assembly session on Feb. 11. Source: The Korea Times
In the latest incident, Bithumb said it managed to recover the majority of mis‑credited assets, with only 125 BTC ($8.6 million) out of the non‑existent 620,000 BTC unrecovered.
Concerns over South Korea’s handling of crypto: The case of the disappearing Bitcoin
The Bithumb incident also lands as authorities face renewed embarrassment over custody and security of seized digital assets.
In 2021, 22 BTC worth about $1.5 million at current prices disappeared from a cold wallet at Seoul’s Gangnam Police Station during a nationwide audit.
A separate August 2025 case saw 320 BTC vanish from the Gwangju District Prosecutors’ Office, reportedly due to a leaked password. Authorities only reported yesterday that the full amount had been recovered after the hacker returned the funds, raising eyebrows as the disclosure comes amid the ongoing FSS investigation into Bithumb.
Lawmakers and industry observers say these incidents underscore persistent weaknesses in authorities’ oversight and custody of digital assets.
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