Bithumb Bitcoin Blunder Triggers Scrutiny of Korea’s Financial Regulators

South Korea is facing questions about how well its financial watchdogs watch over big crypto platforms. The questions come after a major mistake at Bithumb, one of the country’s largest cryptocurrency exchanges. A flaw in Bithumb’s system allowed a single employee to move a large amount of coins without the system catching it. This led to an unusual and very large error in Bitcoin balances for users and raised concerns about internal controls at the exchange and about how regulators inspect these firms.

What happened at Bithumb?

Officials say the problem was serious. Even after careful checks by two government bodies—the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS)—the weakness stayed hidden. A single employee could trigger big transfers of coins that the system did not notice. This is a serious risk in any financial system.

To explain in simple terms: think of a bank where a single staff member could move a lot of money without anyone seeing it on the regular records. That kind of vulnerability is exactly what regulators try to prevent with regular audits and strong control rules.

Who checked Bithumb and when?

South Korea’s lawmakers say the problem shows gaps in how Bithumb’s internal records are kept and how well regulators supervise the company. Rep. Kang Min-guk, from the People Power Party, shared details. He said the FSC checked Bithumb once in 2022 and twice in 2025. The FSS did three inspections during the same period. Yet, none of these checks found a mismatch between what Bithumb actually held and what its records showed.

This kind of mismatch happens when the ledger (the official record of how many Bitcoins or other assets a company has) does not line up with real assets. It can happen for many reasons, such as bad data entry, weak approval steps, or security gaps that allow certain actions to go unnoticed.

The February 6 incident

The trouble became clear on February 6 during a promotional event. Users were accidentally credited with 2,000 BTC each instead of 2,000 won (about $1.38). This is a huge mix-up because BTC is worth a lot more than a small amount of won. The system then registered that 620,000 Bitcoins had been “distributed” to users. In reality, Bithumb’s holdings were about 42,800 BTC. So there was a big gap between what the system showed and what the company actually owned.

The incident drew attention to weaknesses in several areas: how Bithumb manages its internal controls (the rules that tell workers what they can and cannot do), how it keeps its ledger up to date (the official list of who owns what), and how regulators supervise the exchange. Lawmakers from different parties criticized the process. Rep. Han Chang-min, from the Social Democratic Party, asked if the regulator inspections were mostly routine paperwork rather than real checks. He also suggested regulators were trying to place some responsibility on Bithumb rather than looking at the bigger system problems.

What is being investigated now?

The Financial Supervisory Service has extended its probe into February and is looking at possible violations. The focus is on investor protection, anti-money laundering (often known as AML), and possible system flaws. In simple words: they want to know if customers were harmed, if money moved through the system in the right way, and if the technology that runs the exchange is secure.

Bithumb’s chief executive, Lee Jae-won, said there were two smaller errors before that were fixed. The FSS will review these incidents as part of the ongoing investigation.

The work with other exchanges

Authorities have also formed an emergency team. This team includes people from the Digital Asset eXchange Alliance (DAXA). They are checking asset verification (how an exchange confirms who owns what) and internal controls at other major Korean exchanges. The exchanges being looked at include Upbit, Coinone, Korbit, and GOPAX. The results from these reviews could guide DAXA’s self-regulatory rules and future laws about crypto in Korea.

Previously missing Bitcoin case

This latest setback comes after another separate story. Last month, the Gwangju District Prosecutors’ Office said Bitcoin from a criminal case had gone missing. They later recovered all of it. The case involved about 40 billion won in crypto assets and 320.8 Bitcoins. The coins were taken from the hacker’s wallet and returned to the prosecutors’ wallet on February 17. The hacker could not cash out the funds because the coins were held by law enforcement.

Prosecutors had originally seized the BTC from the daughter of a couple who were arrested for running an illegal overseas gambling site. This site allegedly handled about 390 billion won between 2018 and 2021. The couple had converted their criminal earnings into Bitcoin. The loss happened after prosecutors accidentally accessed a phishing site while checking the wallet, which exposed the funds. Authorities say they are still tracking the hacker and watching both domestic and international exchanges to stop more losses.

Why this matters for people who own and use crypto

The Bithumb incident shows why good internal controls are so important. Internal controls are the rules and processes a company uses to protect assets, prevent errors, and stop fraud. Ledger management is the practice of keeping accurate, up-to-date records of every transaction. Anti-money laundering (AML) rules help stop illegal money movements. When these parts fail, people can lose money, or coins can appear to exist when they do not. This kind of mistake can shake public trust and can lead to tighter regulations that affect many exchanges, not just Bithumb.

A quick glossary of key terms

What are some important words here? Here are simple explanations with links if you want to read more.

• Bitcoin — a type of digital money that uses a special online accounting system and cryptography. It lets people send money to others without a bank. More on Bitcoin
• Bithumb — a big online place in South Korea where people buy and sell Bitcoin and other digital assets. More on Bithumb
• Financial Services Commission (South Korea) — the government body that oversees financial markets and companies in Korea. More on FSC
• Financial Supervisory Service — Korea’s main financial regulator that checks banks and other financial firms. More on FSS
• Anti-money laundering (AML) — laws and rules that try to stop criminals from hiding money they earn illegally. More on AML

What happens next

The Korean regulators say they will continue to investigate and fix problems. They want to make sure crypto exchanges are safe and fair for all users. The findings from Bithumb and the checks on other exchanges will likely shape new rules and how these platforms are watched in the future. While regulators work, exchanges are reminded to be careful with big errors and to protect customer assets. In the fast-changing world of crypto, strong controls and thoughtful oversight are very important for public trust and market health.

Source: CryptoPotato