Bithumb Claws Back 99.7% of Overpaid Bitcoin, Covers Remaining Shortfall

South Korean cryptocurrency exchange Bithumb accidentally distributed 620,000 bitcoin worth $44 billion during a promotional event. The mistake occurred on February 5, 2026, when winners were erroneously given at least 2,000 bitcoin each instead of the intended 2,000 Korean won ($1.40) reward. The incident triggered a sharp selloff on the platform before prices stabilized.

Bithumb confirmed the error and swiftly recovered 99.7% of the overpaid assets. The exchange restricted trading and withdrawals for the 695 affected accounts within 35 minutes of the erroneous distribution. The company assured users that customer funds remain safe and no losses were incurred.

South Korean financial regulators, including the Financial Services Commission, responded to the incident with heightened scrutiny. Regulators held an emergency meeting and announced that they would launch an on-site inspection of Bithumb and other crypto exchanges if irregularities are found.

Why Did This Happen?

The error was reportedly a result of an operational mistake during the promotional event, not a security breach or hacking incident. Bithumb acknowledged the issue in a public statement, apologizing to users and stating that it would strengthen safeguards moving forward.

Bitcoin prices on Bithumb briefly slumped 17% to 81.1 million won on the same day, before recovering and closing at 104.5 million won. The incident highlighted the fragility of liquidity conditions on individual exchanges compared to global markets, where price dislocations can occur rapidly due to concentrated trading activity.

What Are Analysts Watching Next?

The Financial Services Commission emphasized that the incident "has exposed the vulnerabilities and risks of virtual assets," signaling a potential shift in regulatory oversight. Regulators are now considering a broader review of internal control systems at exchanges and their holdings of virtual assets.

Analysts are closely monitoring whether Bithumb will face further sanctions or if the incident will prompt a larger regulatory overhaul of the crypto market in South Korea. The Fair Trade Commission is also investigating potential false advertising claims made by Bithumb regarding its liquidity position.

In the short term, the incident could lead to increased scrutiny of other exchanges and potentially stricter operational requirements. For Bithumb, the recovery of 99.7% of the overpaid assets has mitigated the worst-case financial scenario, but the long-term reputational and regulatory implications remain uncertain.

What’s the Broader Implication for the Market?

The Bithumb incident underscores the risks associated with large-scale promotional events and the potential for operational errors to trigger rapid market dislocations. In particular, it demonstrates how a single platform's mistake can have cascading effects on price stability, especially in an asset class with fragmented liquidity.

Regulators now face the challenge of balancing innovation with consumer and market protection. South Korea's regulators have previously taken a cautious approach to crypto assets, and this incident could accelerate the introduction of new rules to prevent future errors and ensure transparency.

Bithumb has positioned itself as a major player in the South Korean crypto space, trailing only Upbit in market share. The current investigation may influence its plans to go public in New York this year. If regulatory challenges persist, they could affect Bithumb's ability to attract international investors and scale operations.

For the broader crypto industry, the event highlights the need for robust internal controls and transparency. As more institutional and retail investors enter the market, trust in the integrity and stability of exchanges becomes a critical factor for long-term adoption.

South Korean regulators have signaled that they are open to inspections of other exchanges to ensure that similar errors are prevented. The incident serves as a cautionary tale for crypto firms globally, emphasizing the importance of rigorous operational safeguards and compliance with evolving regulatory frameworks.

For now, the focus remains on the steps Bithumb will take to address the incident and the potential fallout from regulatory investigations. Market participants are watching closely to determine whether this will mark a turning point in the regulatory environment for crypto assets in South Korea and beyond.