Bithumb Faces Probe Over Erroneous Credit of 620,000 Bitcoin
What Went Wrong at Bithumb?
South Korea’s Financial Supervisory Service has opened an investigation into Bithumb after the exchange mistakenly credited hundreds of thousands of Bitcoin to user accounts that it did not actually hold. According to Yonhap News, the watchdog is examining potential platform violations linked to the erroneous crediting of non-existent Bitcoin during a promotional event.
Bithumb acknowledged the incident on Saturday, stating that it had “incorrectly paid” 620,000 BTC to users. At current prices, that figure equates to roughly $42.8 billion, a number that far exceeds the exchange’s actual Bitcoin reserves. The exchange said most of the miscredited Bitcoin was recovered, but around 125 BTC, valued at about $8.6 million, remains unsettled.
Although Bithumb said no customer assets were ultimately harmed, regulators have flagged the incident as a massive risk to market order. “We are taking this case very seriously,” an FSS official was quoted as saying, adding that the agency would “take stern legal actions against acts that harm the market order.”
Investor Takeaway
Why Regulators Are Focusing on Internal Controls
In outlining its concerns, the Financial Supervisory Service pointed to discrepancies between the amount of crypto held in Bithumb’s wallets and the balances shown in customer accounts. Such mismatches raise questions about how exchanges track liabilities versus on-chain holdings, especially during internal accounting events.
The regulator also highlighted weaknesses in Bithumb’s internal controls. According to reports cited by Yonhap, the error stemmed from a single point of failure, with one staff member reportedly responsible for entering the incorrect currency unit during the promotion. What was meant to be a reward of 2,000 South Korean won, or about $1.40, per user was instead recorded as 2,000 BTC.
That input error caused user accounts to briefly reflect enormous Bitcoin balances that existed only within Bithumb’s internal systems. While the exchange was able to reverse most of the credits, the incident has intensified scrutiny of how centralized platforms manage operational risk and prevent basic input mistakes from escalating.
How “Paper Bitcoin” Became a Flashpoint
The news has fueled renewed debate over so-called “paper Bitcoin,” a term used to describe Bitcoin balances or exposure that are not backed by on-chain assets. CryptoQuant analyst Maartunn described the 620,000 BTC as not being “real” Bitcoin, explaining that the credited amounts existed only virtually and were visible solely inside Bithumb’s systems.
“To put it into perspective, Bithumb currently holds around 41,798 BTC in reserves, far less than the virtual 620,000 BTC that shortly existed on its books,” Maartunn said. He added that the period surrounding the error also saw notable outflows from the exchange.
According to his analysis, roughly 3,875 BTC, worth around $268 million at the time, was withdrawn during the incident window. While some of those withdrawals may reflect users who managed to move mistakenly credited funds, the scale also suggests that other customers may have chosen to exit amid uncertainty.
Maartunn noted that the figures disclosed by Bithumb appear lower than what on-chain data indicates, adding to questions about how much activity occurred during the brief window before corrections were applied.
Investor Takeaway
What This Means for Centralized Exchanges
Bithumb’s case arrives at a time when confidence in centralized exchanges is already fragile. Critics argue that internal ledgers, derivatives, and other off-chain products allow large amounts of Bitcoin exposure to trade without direct on-chain settlement, creating opacity around true supply and demand.
Some market participants have linked the expansion of paper Bitcoin trading to recent volatility, noting that Bitcoin has lost roughly 43% of its value since October 2025. While that decline reflects multiple factors, incidents like Bithumb’s error reinforce concerns that internal accounting practices can distort market perceptions.
For regulators, the focus is less on price impact and more on market integrity. Errors that create billions of dollars in virtual assets, even temporarily, raise questions about whether existing controls at major exchanges are sufficient to protect users and the wider market.
What Comes Next
The FSS investigation is expected to examine whether Bithumb breached platform rules or broader financial regulations through its handling of the incident. Potential outcomes range from corrective orders to penalties if violations are confirmed.
