Bithumb Pledges 110% Payout After $44B ‘Phantom Bitcoin’ Glitch
South Korea’s second-largest exchange attempts to buy back trust with a 110% refund policy after a data entry error flooded its books with $44 billion in nonexistent Bitcoin.
The $44 Billion Typo
South Korean exchange Bithumb is scrambling to restore confidence after a data entry error accidentally credited 695 users with 620,000 BTC (~$44 billion), an amount exceeding the exchange’s actual cold wallet reserves. The “fat finger” incident, which occurred during a promotional event on February 6, triggered a localized flash crash and has since prompted an emergency inspection by South Korea’s financial watchdogs.
The error originated from a “Random Box” rewards campaign intended to distribute modest prizes of 2,000 KRW (~$1.40). Instead, an internal configuration mistakenly set the payout unit to Bitcoin, crediting winners with a minimum of 2,000 BTC each. While the assets existed only as entries on Bithumb’s internal ledger, not on-chain, recipients immediately began dumping the phantom coins.
Flash Crash and Recovery
Liquidity on the platform evaporated instantly. As users sold nonexistent Bitcoin, the BTC/KRW pair on Bithumb collapsed 17% to approximately 81.1 million KRW ($55,000), decoupling violently from global spot prices. The exchange froze withdrawals and trading for affected accounts within 35 minutes.
Bithumb reports it has successfully clawed back 99.7% (618,212 BTC) of the erroneous distribution. However, approximately 1,788 BTC had been sold into the order book before the freeze, creating a realized shortfall the exchange must now cover from its own treasury.
We view this incident sternly as a case exposing the vulnerabilities and risks of virtual assets. Kwon Dae-young, Vice Chairman of the Financial Services Commission (FSC)
110% Compensation Strategy
To mitigate the fallout, Bithumb CEO Lee Jae-won announced a comprehensive compensation package. Traders who panic-sold their actual holdings during the crash window (7:30 PM – 7:45 PM KST) will be reimbursed for the price difference plus a 10% bonus (110% total).
Additional remedial measures include:
- Universal Airdrop: A 20,000 KRW credit to all users active during the incident.
- Fee Waiver: Zero trading fees across all assets for seven days.
- Protection Fund: Establishment of a 100 billion KRW (~$70M) reserve for future operational failures.
Regulatory Hammer Drops
The incident has accelerated regulatory intervention in Seoul. The Financial Supervisory Service (FSS) and the Financial Intelligence Unit (FIU) launched an emergency task force and signaled immediate on-site inspections of Bithumb’s internal controls. The probe will extend to other domestic exchanges to verify that ledger balances match on-chain custody, a direct challenge to the “fractional reserve” fears that surface during such glitches.
