A $1.20 Reward Turned Into $140 Million Per Account
On February 7, 2026, a Bithumb employee sat down to distribute a routine promotional payout: 2,000 Korean won (about $1.20) to each of 249 event winners. Instead, the staffer entered the unit as "BTC" rather than "won," crediting each account with 2,000 bitcoin, worth roughly $140 million at market prices.
In total, 620,000 phantom bitcoins flooded Bithumb's internal ledger, a sum worth over 63 trillion won ($43 billion) and representing nearly 3% of Bitcoin's entire circulating supply. The exchange's actual on-chain reserves at the time sat at roughly 43,000 BTC. The coins never moved on the blockchain, but inside Bithumb's system, they were as real as any other balance.
Within minutes, 86 of the 249 recipients began selling. Bitcoin's listed price on Bithumb crashed to $55,000, roughly 30% below the global average, as paper bitcoin flooded the order book. By the time Bithumb froze trading and withdrawals for the affected accounts, 1,788 bitcoins had already changed hands.
The exchange caught the error within 35 minutes. It recovered 99.7% of the phantom coins. The remaining 0.3%, approximately 125 BTC worth 13 billion won, has not been returned, and a legal battle over those coins appears inevitable.
Why a Typo Exposed a $43 Billion Structural Flaw
The surface explanation is human error: one dropdown menu, one wrong selection. But the deeper problem, and the reason South Korean regulators are treating this as a systemic event, is that Bithumb's internal ledger allowed the creation of 620,000 bitcoins that never existed on-chain.
Hwang Suk-jin, a professor at Dongguk University, put it plainly: "If ledger data and real assets had been properly matched in real time, this kind of 'ghost coin' situation would not have been possible."
Traditional financial institutions separate trading, brokerage, and settlement across multiple entities with layered reconciliation checkpoints. Bithumb, like many crypto exchanges, combines all of these roles into a single platform. There was no system-level guardrail that flagged an outgoing transfer exceeding total reserves by 14x. No automated reconciliation caught the discrepancy before users started selling.
This is the architectural weakness regulators have long warned about: centralized exchanges that function as bank, broker, and clearinghouse simultaneously, without the internal controls that traditional finance requires for each of those roles individually.
South Korea's FSS Launches a Sweeping Investigation
On Monday, February 10, the head of South Korea's Financial Supervisory Service (FSS) held a press conference confirming that the agency has launched targeted probes into Bithumb and the broader virtual asset market.
FSS Governor Lee Chan-jin said the error "laid bare the structural problems of virtual asset exchanges' ledger systems" and announced several immediate actions:
- Emergency task force examining Bithumb's management practices, internal controls, IT infrastructure, and customer asset safeguarding
- Punitive fines for IT incidents across the entire financial sector, not just crypto
- Enhanced executive accountability, raising the security obligations of CEOs and Chief Information Security Officers
- Expanded information security disclosures for all virtual asset service providers
- On-site inspections for companies exhibiting critical vulnerabilities
Governor Lee also warned that if the inspection uncovers legal breaches, "we will promptly escalate the review to a formal investigation" with strict enforcement measures.
Perhaps most significantly, the FSS confirmed it has established a preparatory team for the Basic Digital Asset Act, South Korea's planned second phase of crypto regulation. This expanded framework would require exchanges to adopt internal control standards comparable to traditional financial institutions, and weaknesses in those systems could put exchange licenses at risk.
What Affected Users Face Now
Bithumb CEO Lee Jae-won announced a compensation plan on Sunday that covers three groups:
- All users connected during the incident receive 20,000 won ($13.73) as a blanket apology payment
- Users who sold bitcoin at the artificially depressed price receive 100% of the selling price difference plus 10% consolation money
- All customers get zero trading fees for one week
The exchange covered the unrecovered 0.3% (roughly $123 million) with company assets.
But the situation is far from resolved. Users who sold the phantom bitcoins now face potential legal exposure. Those 86 sellers may need to repurchase bitcoins at current market prices to return assets they received in error. South Korea's ruling Democratic Party has called the incident a revelation of "structural vulnerabilities," and civil lawsuits for unjust enrichment are widely anticipated. Criminal liability remains uncertain, with legal experts pointing to a 2021 Supreme Court ruling that left the question partially unresolved.
What This Means for Exchange Security Standards Globally
The Bithumb incident will likely accelerate regulatory momentum far beyond South Korea. If an exchange can accidentally create $43 billion in phantom assets without triggering a single automated safeguard, the argument for mandatory proof-of-reserve systems and real-time ledger reconciliation becomes much harder to dismiss.
For users of centralized exchanges, the lesson is concrete: your exchange balance is only as trustworthy as the platform's internal controls. The 620,000 ghost bitcoins never existed on-chain, but they were real enough to crash prices and trigger a regulatory crisis. This is precisely the risk that self-custody solutions and on-chain transparency tools are designed to mitigate.
Exchanges like Binance have invested heavily in proof-of-reserve systems and security infrastructure specifically to prevent scenarios where internal ledgers diverge from actual holdings. The UEX security standard recently released by Bitget and BlockSec also addresses this exact class of vulnerability, mandating real-time asset verification.
The Bithumb case provides regulators worldwide with a vivid, quantifiable example of what happens when those safeguards are absent. Expect proof-of-reserve mandates and mandatory external audits to climb the priority list for financial regulators in every major crypto market.
FAQ
How much was the Bithumb fat-finger error worth? The error credited 620,000 phantom bitcoins to 249 user accounts, worth approximately $43 billion (63 trillion Korean won). This represented nearly 3% of Bitcoin's total circulating supply, though no actual on-chain bitcoin was created or moved.
Did anyone lose real money? Yes. Before Bithumb froze trading (within 35 minutes), 86 users sold 1,788 bitcoins at artificially depressed prices. Users who sold legitimate holdings at the crashed price of $55,000 will receive full compensation plus 10% from Bithumb. Users who sold phantom bitcoins may face legal action to return the proceeds.
What regulatory changes will result from this incident? South Korea's FSS is launching industry-wide inspections, introducing punitive fines for IT failures, and accelerating the Basic Digital Asset Act, which would require crypto exchanges to meet internal control standards comparable to banks. Exchange licenses could be at risk for platforms with inadequate safeguards.
Could this happen at other exchanges? Any exchange that does not perform real-time reconciliation between its internal ledger and on-chain reserves is theoretically vulnerable to similar errors. The incident has intensified calls for mandatory proof-of-reserve systems and external audits across the industry.
Overview
A single data entry error at South Korea's second-largest crypto exchange, Bithumb, accidentally credited 620,000 phantom bitcoins worth $43 billion to 249 user accounts on February 7. The mistake, caused by selecting "BTC" instead of "won" as the payout unit, temporarily crashed Bitcoin's price on the platform by 30% before being caught in 35 minutes. South Korea's Financial Supervisory Service has launched a sweeping investigation, announced punitive fines for IT failures, and is accelerating the Basic Digital Asset Act to hold exchanges to banking-grade internal control standards. For crypto users, the incident is a stark reminder that exchange balances exist on internal ledgers, not on-chain, and that proof-of-reserve systems and self-custody remain critical safeguards.
Recommended Reading
- Binance's Human Firewall Prevented $6.69 Billion in Scam Losses in 2025, Protecting 5.4 Million Users
- Bitget and BlockSec Release the UEX Security Standard, Setting a New Benchmark for Asset Protection Across Crypto and TradFi
- Solana Co-Founder Toly Calls for a Return to Self-Custody and Trustless Software as Crypto's North Star
Sources
- The Block: South Korea launches probe into Bithumb
- KED Global: Bithumb's phantom bitcoin glitch sparks scrutiny
- Decrypt: Investigators Circle as Bithumb Reveals Compensation Plan
- The Korea Herald: Beyond a fat finger, hidden risks of crypto exchanges
- The Korea Times: Financial watchdog plans massive probes into Bithumb
