South Korean lawmakers are escalating their investigation into financial regulators who overlooked a critical structural issue within crypto exchange Bithumb. This oversight resulted in an astonishing error where billions in Bitcoin were erroneously credited to user accounts.
Despite multiple reviews of Bithumb by the Financial Services Commission and the Financial Supervisory Service since 2022, a significant input flaw remained undetected. Lawmakers are now criticizing this as evidence of complacent supervision and regulatory gaps in the virtual asset market.
The incident earlier this month saw hundreds of accounts mistakenly receive over 2,000 Bitcoin each, instead of the intended 2,000 Korean won. While Bithumb corrected the internal ledger issue within minutes, the erroneous distribution triggered a flash crash on the exchange, with some users selling the crypto at drastically reduced prices.
Bithumb managed to recover nearly all the wrongly distributed Bitcoin, but the company absorbed the financial impact of the remaining unrecovered assets. The exchange has since implemented a compensation plan for affected users and pledged enhanced security measures.
Regulators have acknowledged the incident exposed fundamental weaknesses and blind spots requiring urgent remediation. An investigation by the Financial Supervisory Service is ongoing, with an extended deadline to uncover the full scope of the issue.