South Korea: A $44 Billion Mistake Puts Crypto Exchanges Under Heavy Scrutiny

A computer glitch on one of South Korea’s largest exchanges nearly created the heist of the century. Last Friday, Bithumb accidentally credited 695 users with 2,000 Bitcoin each — instead of small promotional rewards. Total value of the error: approximately $44 billion.

The incident immediately triggered a response from Korean regulators, who are announcing a major crackdown on crypto platform oversight.

Anatomy of a $44 Billion Mistake

The incident occurred last Friday on Bithumb, one of South Korea’s largest exchanges. Instead of distributing small promotional rewards, a bug credited 2,000 BTC to each of the 695 affected accounts.

35 Minutes of Chaos

During the 35 minutes it took Bithumb to identify and correct the error, several users tried to capitalize on the windfall:

• Some attempted to mass sell their « free » BTC
• Bitcoin’s price on Bithumb dropped 30% compared to global rates
• Withdrawal attempts were blocked

The exchange ultimately restricted transactions and withdrawals from the 695 affected accounts, preventing any fund leakage.

A Precedent Worth Considering

This incident isn’t the first of its kind. In 2021, Compound Finance accidentally distributed $90 million in COMP tokens to its users. But the scale of the Bithumb error — $44 billion — is unprecedented in cryptocurrency history.

Korean Regulators’ Strong Response

The Financial Supervisory Service (FSS), South Korea’s main financial regulator, was quick to react. On Sunday, the agency announced a series of measures to strengthen exchange oversight.

New AI Surveillance Tools

The FSS will deploy:

• Automatic extraction of suspicious trading patterns, down to the second and minute
• AI text analysis to detect market manipulation on social media
• Real-time alerts on abnormal behavior

Priority Investigation Targets

The regulator has identified several « high-risk » practices that will be subject to investigation:

• Price manipulation by whales
• Trading patterns linked to deposit/withdrawal suspensions
• Coordinated pump tactics via social media disinformation

The Basic Digital Asset Act in Preparation

Beyond immediate measures, the FSS has confirmed the creation of a preparatory team for the « Basic Digital Asset Act, » a framework law that would significantly expand crypto regulation in South Korea.

This law would complement the first phase of regulation that came into force in 2024, which already required exchanges to:

• Mandatory registration with authorities
• Strict KYC (Know Your Customer) requirements
• Segregation of client funds

Personal Liability for Executives

Notable point: the FSS plans to introduce punitive fines for IT incidents across the financial sector, with expanded personal liability for CEOs and Chief Information Security Officers (CISOs).

This measure could have direct implications for crypto platforms, where technical failures can have massive financial consequences.

South Korea: A Laboratory for Crypto Regulation

South Korea is one of the world’s most active crypto markets, with a young and tech-savvy population. The country has experienced several major scandals, from the Bithumb hack in 2019 to the Terra/Luna collapse in 2022.

President Lee Jae-myung has made fighting « cruel financial practices » a priority of his administration. The Bithumb incident gives him an opportunity to further strengthen the regulatory arsenal.

What This Means for Investors

For users of Korean exchanges, the consequences are clear:

• Increased surveillance of large transactions
• Potential delays on withdrawals in case of suspicious behavior
• Enhanced protection in case of technical failures

On a global scale, the incident illustrates the systemic risks associated with technical errors on centralized platforms — and why self-custody remains an option to consider for significant amounts.