Crypto Exchange Accidentally Gave Away $40 Billion Worth of Bitcoin

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Bithumb, one of South Korea's largest cryptocurrency exchanges, found itself at the center of a major scandal due to a baffling technical error.

It all began with a routine promotional campaign that aimed to distribute small cash rewards to users. The total prize pool was a modest 620,000 Korean won, equivalent to approximately $425 USD, writes The Wall Street Journal.

However, instead of won, an exchange employee mistakenly entered a different currency. As a result, users were credited not with 620,000 won, but with 620,000 bitcoins. At the time the error occurred, this amount was valued at over $40 billion.

To understand the scale of the incident: a winner who was supposed to receive a symbolic 2,000 won — the cost of a cup of coffee — suddenly became the owner of assets worth over $120 million. Some recipients immediately tried to sell or withdraw the bitcoins.

The market reaction was immediate — the price of Bitcoin on the exchange plummeted by 17%. Approximately half an hour after the incident began, the crypto exchange completely halted trading. Ordinary investors who held their assets on the exchange before the incident were also affected by Bithumb's actions: their losses are estimated at $685,000.

Bithumb management stated that almost all erroneously credited funds were returned: over 99% of bitcoins were either automatically recalled or voluntarily returned by users. However, a problem remains with those who managed to sell over 100 bitcoins — this amounts to about $9 million at the exchange rate at the time of the incident.

To atone for the error, Bithumb offered compensation to those affected, temporarily abolished trading fees, and promised to create a $70 million customer protection fund for future incidents.

The incident attracted close attention from regulators and exposed serious problems in the security system of the South Korean crypto market.

Lawmakers and experts raised questions about so-called "phantom coins." According to local legislation, exchanges are not allowed to permit trading volumes that exceed their actual reserves. However, Bithumb somehow managed to technically distribute 620,000 bitcoins, even though its own reserves were estimated at approximately 50,000 coins.

South Korean financial regulators have already launched an official investigation, which threatens the exchange with fines and sanctions. Lee Jeong-su, a government advisor on digital assets, called the situation "a catastrophic failure of internal control," noting that for such a large financial institution, having such vulnerable IT systems is simply unacceptable.

Large-scale accidental losses or "giveaways" of bitcoins are extremely rare. In 2013, an IT specialist from Wales lost about 7,500 bitcoins after a hard drive containing the keys was accidentally thrown away. In 2021, crypto lender BlockFi mistakenly sent hundreds of bitcoins to users, but later managed to recover most of the funds.

However, what happened with Bithumb is already being called one of the most expensive errors in the history of the crypto industry and a serious signal for the entire market.

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