Bithumb’s $44B ‘Ghost Bitcoin’ Error Triggers 17% Flash Crash and FSC Probe

South Korean exchange Bithumb inadvertently credited users with 620,000 BTC (approx. $44 billion) on Friday, a sum exceeding the entire treasury of the U.S. government, due to a clerical error that confused “Won” with “Bitcoin.”

The incident, now dubbed the “Ghost Bitcoin” glitch, triggered a localized 17% flash crash on the exchange as users rushed to liquidate non-existent assets. While Bithumb clawed back 99.7% of the funds within 35 minutes, the blunder has forced South Korea’s Financial Services Commission (FSC) to expedite strict “bank-level” internal control mandates for the crypto sector.

The $44 Billion Typo

The error occurred during a “Random Box” promotional event intended to distribute small rewards of 2,000 KRW (~$1.40) to 249 winners. According to Bithumb’s statement to local media, an employee mistakenly input the currency code as BTC instead of KRW.

The result was the instant creation of phantom liquidity. Bithumb’s internal ledger inflated by 620,000 BTC. Roughly 3% of Bitcoin’s total circulating supply, despite the exchange holding no corresponding on-chain assets to back the credit.

The biggest problem in this case is that crypto assets that do not exist were traded. There is a need to check internal controls and systems across crypto exchanges. Lee Chan-jin, Governor of the Financial Supervisory Service (FSS)

Liquidity Crunch & Market Impact

The “ghost” credits hit the order books immediately. Recipients dumped the phantom coins, driving Bithumb’s BTC price down to 81 million KRW ($55,000), a nearly 17% discount compared to the global spot price, which held steady around $71,000.

Arbitrage bots and traders on other platforms were unable to capitalize on the spread due to the “Kimchi Premium” friction and the speed of the collapse. Bithumb froze withdrawals and trading for affected accounts within roughly half an hour.

While 99.7% of the erroneous transactions were reversed, 125 BTC (~$9 million) was successfully withdrawn or sold before the freeze. Bithumb has committed to covering these losses from its corporate treasury.

The Regulatory Hammer

The FSC is treating this not as a technical glitch, but as a structural failure of centralized ledgers. The incident exposes a critical vulnerability: centralized exchanges (CEXs) can alter user balances off-chain without proof of solvency.

Regulators have announced immediate measures:

• Mandatory External Audits: Exchanges must undergo periodic third-party verification of digital asset holdings.
• Strict Liability: Operators will face direct liability for system errors, regardless of intent.
• Bank-Level Controls: The FSC will impose internal control standards equivalent to those of commercial banks, specifically targeting the separation of duties in reward distribution.

Bitcoin (BTC) shrugged off the localized chaos, currently trading at $70,961 (+2.4% 24h) as institutional buyers continue to bid the dip.