Earlier today, reports surfaced regarding a jaw-dropping clerical error at South Korean crypto exchange Bithumb regarding a promotional reward being sent to some customers. According to some early accounts, the reward was supposed to be 2,000 Korean won, but the users were sent 2,000 bitcoin instead. At current prices, this amounts to a roughly $140 million giveaway. That would be bad. But it was apparently much worse.
Bithumb itself has confirmed the error and indicated 620,000 bitcoin (worth around $43 billion) was accidentally sent to 695 users. The amount was large enough to cause a temporary 10% downtick in the price of bitcoin on the exchange, as some of the customers who received the misallocated funds immediately sold them. According to Bithumb, further damage was avoided by limiting withdrawals and transactions for the affected customers, and 99.7% of the errantly sent bitcoin has been recovered.
“We would like to clarify that this matter has nothing to do with external hacking or security breaches, and there are no problems with system security or customer asset management,” reads a translated version of Bithumb’s post on the matter.
The massive amount of bitcoin handed out to Bithumb customers also brings the concept of “paper bitcoin” to the forefront, as the reality is these exchanges do not necessarily have all of the bitcoin to back the amounts shown to their respective customers. This issue was at the heart of the infamous collapse of early bitcoin exchange Mt. Gox in 2014, which was by far the largest crypto exchange at the time. According to blockchain data provider Arkham Intelligence, Bithumb has roughly $5.3 billion in assets, which is nowhere near the $43 billion it says it errantly awarded to some of its customers.
https://x.com/definalist/status/2019736545755120108
As one X account pointed out, it’s incredible that such a large amount of bitcoin could be mistakenly sent without triggering any sort of precautionary measures. That said, it should perhaps not be too surprising in the case of Bithumb, as the crypto exchange has been hacked at least three times since it launched in 2014.
The first hack in 2017 involved the compromise of an employee device that had customer data on it, which was then used to conduct phishing attacks on those customers. Another hack took place in 2018, where roughly $30 million in crypto assets was stolen by Lazarus Group, which is a hacking group with ties to North Korea. Perhaps most concerning in the context of today’s incident, a further $20 million was stolen from Bithumb in 2019, and the incident was initially thought to be an inside job.
It’s important to note that no customers have ever been affected by these hacks (outside of the leaks of personal information), with Bithumb covering the lost assets. That said, the exchange has also been raided on multiple occasions over the years for charges ranging from fraud to embezzlement. In fact, Bithumb was raided yet again earlier this week over concerns related to false advertising and misleading promotional materials.
Bithumb has said no loss of customer funds occurred as a result of today’s incident, as there potentially could have been liquidations for leveraged traders during the price movement that occurred as a result of the falsely-awarded bitcoin. This was the situation that unfolded recently with the so-called decentralized exchange Paradex, which ended up using the centralized solution of rolling back trades that occurred during a pricing error.
This latest incident at Bithumb comes at a time when the crypto market as a whole is under stress, with crypto asset prices severely down from the October highs, and ethics-related concerns associated with the Trump family’s crypto businesses becoming an increasingly loud political issue for the administration. Jeffrey Epstein’s early investments and involvement in the crypto industry were also revealed in the latest batch of files released by the U.S. Department of Justice, which has led to rampant speculation and Bitcoin conspiracy theories on social media.
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