South Korea's financial regulator launched an investigation into Bithumb after the exchange mistakenly credited users' accounts with tons of of 1000’s of Bitcoins that it didn’t actually own.
The Financial Supervisory Service (FSS) has opened an investigation into Bithumb for alleged platform violations related to the mistaken crediting of billions of dollars in non-existent Bitcoin (BTC) to user accounts, Yonhap News reported on Tuesday.
Bithumb acknowledged the incident on Saturday, saying the platform “mistakenly” paid 620,000 BTC ($42.8 billion) to users during a promotional event.
While the exchange has recovered nearly all of the misplaced BTC, about 125 BTC ($8.6 million) stays unsettled, raising questions on operational risks at centralized exchanges (CEXs) and fueling community concerns about “paper bitcoin.”
The authorities point to several suspected violations by Bithumb
Although Bithumb said the incident didn’t end in any loss or damage to customer assets, South Korean financial authorities have flagged a possible impact on the broader market.
“We take this case very seriously,” an FSS official reportedly said, adding: “The FSS will take strict legal motion against actions that harm market order.”
Bithumb confirmed a “false payment” of 620,000 BTC on Saturday. Source: Bithumb
The regulator identified Bithumb's alleged violations, including discrepancies between the cryptocurrencies held in its wallets and the amounts credited to user accounts.
The FSS also cited deficiencies in Bithumb's internal controls, noting that the failure was on account of a single error: an worker was reportedly liable for the wrong BTC crediting.
Concern about “paper Bitcoin” is increasing
“The 620,000 BTC weren’t 'real' Bitcoin,” CryptoQuant analyst Maartunn told Cointelegraph, adding that the credited BTC existed purely virtually and was only visible in Bithumb's internal systems.
The exchange's promotional event, which was speculated to reward users with 2,000 South Korean won ($1.40), resulted in 2,000 BTC per user because an worker mistakenly entered “BTC” because the currency unit as an alternative of “won,” he said.
“To put it in perspective, Bithumb currently holds around 41,798 BTC in reserves, far lower than the virtual 620,000 BTC that was on its books just before,” Maartunn said, adding that some users benefited from the incident:
“At around this time, 3,875 BTC, or roughly $268 million, were withdrawn from the exchange. This could possibly be due partly to users who managed to withdraw the incorrectly credited BTC, however it could also indicate a bigger lack of trust amongst other users.”
The numbers reported by Bithumb are subsequently lower than the on-chain data suggested, Maartunn said.
Cointelegraph reached out to the FSS and Bithumb for comment on the reported investigation but didn’t receive a response via publication.
Bithumb's news adds to the community's growing concerns about “paper bitcoin,” or Bitcoin, which doesn’t exist on the blockchain but is traded on CEXs or exchanges in the shape of products similar to derivatives and exchange-traded funds.
Some even suggested that Bitcoin paper trading contributed to the continued market turmoil, as Bitcoin has lost around 43% of its value since October 2025.
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