Bithumb Admits $40B Transfer Error After Internal System Failure

• Bithumb system flaw triggers erroneous $40B Bitcoin transfer during promotion event.
• Mistaken 620,000 BTC payout causes 17% price drop and forced liquidations.
• Exchange reverses 99.7% of entries and seeks voluntary return of withdrawn funds.

South Korea’s second-largest cryptocurrency exchange, Bithumb, disclosed that internal system flaws led to an erroneous transfer of more than $40 billion in digital assets during a promotional event last week. The exchange confirmed it mistakenly distributed approximately 620,000 Bitcoins instead of 620,000 Korean won, leading to a temporary 17% decline in Bitcoin’s price on its platform.

The incident occurred during a promotional payout, when internal controls failed to detect that the distributed Bitcoin far exceeded the exchange’s actual holdings. According to Chief Executive Officer Lee Jae-won, the erroneous transfer equaled roughly 15 times Bithumb’s reported Bitcoin reserves of 42,000 BTC. A processing lag of about 24 hours prevented real-time balance updates, allowing the transfer to proceed unchecked.

Internal Controls Failed to Prevent Transfer

Lee acknowledged before a parliamentary committee that the exchange lacked a real-time safeguard to block such a transaction. The company’s internal ledger system, which operates independently of blockchain confirmations, did not immediately align with actual asset holdings. As a result, the system processed the Bitcoin distribution without verifying available reserves.

Bithumb stated that its policy requiring cross-checks between transfer volumes and actual holdings failed. In addition, the distributed assets were not earmarked in a separate account before the transfer. Lawmakers expressed concern over the breakdown in oversight within one of the world’s most active virtual asset markets by trading volume.

Regulators reported that 86 users sold approximately 1,788 Bitcoin within 35 minutes before Bithumb froze affected accounts. Some customers transferred proceeds to bank accounts, while others used the funds to purchase alternative tokens. Authorities said customers who liquidated the assets mistakenly distributed to them are legally required to return them.

Market Impact and Customer Fallout

The sudden selling pressure led to a temporary price slump on Bithumb’s platform and triggered automatic margin calls for more than 30 users who had pledged bitcoin as collateral. Lee identified panic selling and forced liquidations as the primary areas of customer damage under review.

Bithumb said it has reversed 99.7% of the incorrect ledger entries and is in discussions with approximately 80 customers who withdrew Korean won equivalents. The exchange indicated it is seeking voluntary returns to avoid possible civil litigation, which could require customers to return the original Bitcoin rather than cash equivalents.

In a public statement, Bithumb said the incident was not linked to external hacking or a cybersecurity breach. The company added that it is redesigning its asset payment processes and strengthening internal controls to prevent recurrence.

Related: Crypto Crackdown in South Korea: Upbit Suspended, Bithumb Investigated, Overseas Exchanges Face Action