One of the biggest South Korean crypto exchanges on its $40 billion 'mistake': 'We would like to make it clear that...'

South Korean cryptocurrency exchange Bithumb has confirmed it accidentally distributed more than $40 billion in bitcoin to customers as promotional rewards. This triggered a major sell-off on the exchange.

However, Bithumb apologised for the mistake, which occurred this week, and said it had recovered 99.7% of the 620,000 bitcoins, worth about $44 billion at current prices. The exchange had restricted trading and withdrawals for the 695 affected customers within 35 minutes of the accidental distribution this week.“We would like to make it clear that this incident is unrelated to external hacking or security breaches, and there are no problems with system security or customer asset management,” Bithumb said in a statement to CNBC.The crypto exchange reportedly had planned to distribute small cash rewards of 2,000 Korean won ($1.40) or more to each user as part of a promotional event, but winners instead received at least 2,000 bitcoins each.The company also admitted that the error briefly caused "sharp volatility" in bitcoin prices on the platform as some recipients sold the tokens, adding that it brought the situation under control within five minutes.

Bithumb’s charts showed the token's price fell 17% to 81.1 million won on the platform after the incident. The price later recovered and last traded at 104.5 million won. Bithumb is behind Upbit, a prominent player in South Korea's crypto space.In a separate statement released later, Bithumb said that some trades were executed at poor prices for users due to a price drop during the incident, including "panic selling".

The platform said it would compensate affected customers by covering the full price difference and a 10% bonus. The company estimated losses at about 1 billion won ($976,579).

What South Korea’s financial regulators said about the incident

South Korea's financial regulators, including the Financial Services Commission, said that the incident "has exposed the vulnerabilities and risks of virtual assets."After an emergency meeting, the regulators said in a statement that they would launch an on-site inspection of Bithumb and other crypto exchanges if irregularities are found during reviews of their internal control systems, as well as their holdings and operations involving virtual assets.However, the platform earlier assured that the incident was "unrelated to external hacking or security breaches".Apart from this, Bitcoin, the popularly traded cryptocurrency, fell this week, erasing gains sparked by US President Donald Trump's election victory in November 2024.