Bithumb's surprise airdrop of 620,000 Bitcoins, Korean regulators intervene for a comprehensive review

On the evening of February 6th, South Korea’s second-largest cryptocurrency exchange, Bithumb, saw its Bitcoin listing price plummet 17% within just a few minutes, reaching a low of 81.11 million Korean won (approximately $55,000) per coin.

The cause was an incredible operational error: the exchange originally planned to distribute rewards of 2,000 to 50,000 Korean won (roughly 9.5 RMB to 237 RMB) per user, but due to a system setup mistake, the currency unit was set to Bitcoin instead of Korean won.

Event Overview

A routine promotional event at South Korea’s Bithumb turned into one of the most costly operational errors in industry history. On Friday night at 7 p.m. local time, Bithumb’s “Random Chest” event officially launched.

What was initially a standard marketing campaign offering small cash rewards to participants turned into a shocking incident of Bitcoin airdrops to users due to staff error in setting the reward units.

According to a post-event review published by Bithumb, the exchange only discovered the anomaly 20 minutes after the event started — “it was sending Bitcoin instead of Korean won.”

From the moment the error occurred to when the issue was identified and response procedures were initiated, a delay of 35 minutes allowed the mistake’s impact to spread rapidly. It wasn’t until 7:40 p.m. that Bithumb froze trading and withdrawal permissions for affected accounts.

Data Discrepancies and Regulatory Intervention

There are significant differences in reports regarding the amount of Bitcoin mistakenly distributed. South Korean media outlets like Yonhap News Agency reported that Bithumb erroneously issued as many as 620,000 Bitcoin, valued at over $44 billion at the time.

However, some international media sources reported the mistaken distribution involved approximately 2,000 Bitcoin. This vast discrepancy highlights the confusion in the information dissemination process surrounding the event.

Whether it was 620,000 or 2,000 Bitcoin, this incident was enough to alarm South Korean regulators. Following the event, the Financial Supervisory Service (FSS) held an emergency meeting Saturday morning, chaired personally by Director Lee Chan-jin.

Kim Dae-young, Vice Chairman of the Financial Services Commission, stated seriously at the meeting: “We regard this incident as a serious case exposing vulnerabilities and risks in virtual asset systems.”

Market Impact and User Compensation

As Bitcoin prices on Bithumb plunged due to sudden sell-offs, the entire crypto market experienced a sharp correction. Bitcoin briefly touched $60,000, hitting a 16-month low.

Data from CoinGlass showed that over 580,000 traders worldwide were liquidated on that day, spreading market panic. As of February 10, according to data from the Gate platform, Bitcoin had rebounded to around $69,000.

Bithumb’s latest announcement confirmed that by 4 p.m. Saturday, user losses caused by “panic selling” amounted to approximately 1 billion Korean won. The exchange announced it would fully compensate affected users and provide an additional 10% compensation.

Meanwhile, the exchange is actively recovering the erroneously distributed assets. According to recent disclosures, of the 620,000 Bitcoin mistakenly issued, 618,212 have been recovered. After the incident, 1,788 Bitcoin worth of assets were sold, with 93% already recovered.

System Flaws and Industry Impact

Shockingly, according to Bithumb’s quarterly report, as of the end of Q3 last year, the exchange’s actual Bitcoin holdings totaled only 42,600. This means the 620,000 Bitcoin mistakenly issued is nearly 15 times its actual holdings.

This fact has raised concerns within the industry about the “phantom Bitcoin” problem at crypto exchanges. If these mistakenly issued Bitcoins do not actually exist, the transparency of exchange asset reserves would be seriously questioned.

Bithumb has committed to implementing a series of improvements, including refining the approval process for promotional activities, adding at least two approval stages, and strengthening anomaly detection and automatic interception via AI systems.

This incident exposes the vulnerabilities in internal controls and risk management even at major crypto exchanges. A simple input error can trigger market chaos worth hundreds of billions of dollars, serving as a wake-up call for the entire industry.

Summary

As of February 10, Bitcoin prices on the Gate platform have recovered to around $69,000, but the 125 Bitcoin gap caused by the Bithumb incident remains unfilled.

South Korean regulators have announced plans to conduct a comprehensive review of internal control systems, asset holdings, and operational procedures across all domestic crypto exchanges. This storm triggered by a data entry mistake may ultimately push the industry toward establishing stricter operational standards and regulatory frameworks.