Bithumb Probed After $40B Bitcoin Error as CEO Cites System Glitch

South Korea’s cryptocurrency exchange Bithumb suspended trading as it mistakenly distributed Bitcoin worth around $40 billion during a promotional event, Bloomberg reported. The company’s Chief Executive Officer was summoned by lawmakers to explain the failure of internal controls that led to the incident.

The employees of the company were instructed to distribute 2,000 Korean won among selected users during a promotional airdrop. However, one of the employees selected Bitcoin as the reward currency instead of the Korean won. 

This led to the distribution of around 2,000 Bitcoin among the users who were eligible for the reward. This was revealed during the hearing of the parliament session.

Bithumb Halts Trading After Sudden BTC Dump

The users who received the cryptocurrency sold their units shortly after receiving the reward. This caused a sudden spike in the price of the BTC/KRW pair on the Bithumb cryptocurrency exchange. Trading volumes for the cryptocurrency also spiked as users attempted to sell it.

The exchange suspended trading shortly after detecting unusual activity on the exchange. The company claimed that the suspension was necessary to prevent further disruption of the cryptocurrency market. The company later started freezing the accounts of the users who received the cryptocurrency as part of the reward.

Min Byeong-deok, a parliament member, criticized the company’s internal control during the parliament session. He claimed that the company gave out Bitcoin that it did not own, which is similar to naked short selling.

Also Read: Bithumb Bitcoin Payment Error Sparks Sudden Market Shock, 99.7% Funds Recovered

In his statement, Lee apologized and admitted the gravity of the situation. He attributed the mistake to human error and a system glitch. He promised to improve the system’s operation and monitoring procedures.

Mistaken Transfer Far Exceeds Bithumb’s Reserves

Bithumb revealed that their system sent 620,000 coins instead of 620,000 won due to their system’s failure to stop the transaction before completion. According to Lee, the process of completing the transaction takes up to 24 hours, which contributed to the delays experienced in detecting the mistake.

Source: Bloomberg

The incorrect distribution, according to the testimony, was an estimate of 15 times Bithumb’s reported 42,000 BTC holdings. The $40 billion estimate is based on the current price of Bitcoin at the time of transfer.

Most of the wrongly distributed assets were recovered, although 1,786 BTC were sold before the accounts were frozen, with efforts underway to recover the rest of the assets.

The incident has sparked interest and pressure from authorities to strengthen regulations of cryptocurrency exchanges in South Korea, as the Virtual Asset User Protection Act has already been enforced to strengthen rules and security of such exchanges.

Also Read: Bitcoin (BTC) Whales Accumulate $4.7B BTC During Market Dump