South Korea’s Bithumb admitted on Wednesday that a critical flaw had exposed the trading platform’s internal systems to potential sabotage and prevented it from preventing the mistaken transfer of $40 billion in Bitcoin to customers, according to Reuters.
The fiasco, which triggered a 17% plunge in bitcoin prices on Bithumb, was due to the country’s second-largest cryptocurrency trading platform accidentally distributing 620,000 bitcoins to customers instead of 620,000 won (approximately $428), according to Reuters.
The Financial Supervisory Service announced on Sunday that it would launch an investigation into “high-risk” conduct by so-called whales that undermines market order, including large-scale price manipulation, trading schemes linked to suspension of deposits and withdrawals, and coordinated pumping tactics fueled by misinformation on social media. The watchdog also said it plans to build tools to automatically extract suspicious trading patterns at the second and minute level, alongside a text analysis system using artificial intelligence to flag potential market abuse.
Bithumb CEO Lee Jae-won said the gift amount reached 15 times the crypto trading platform’s 42,000 Bitcoins, mainly due to a 24-hour delay in transaction processing and delays in updating crypto holdings. “I am acutely aware of the deficiencies in internal system management,” Lee said at a recent parliamentary committee hearing.
The CEO acknowledged that Bithumb’s policy of ensuring that the amount of assets transferred matched the actual holdings had failed and that the amount was not allocated to a separate account to ensure the security of the transfer.
The exchange recovered most of the bitcoin, but 1,786 bits that were sold within minutes of the exchange freezing customers’ accounts are still missing, the Reuters report added. The customer who sold the missing Bitcoins is legally obligated to return the Bitcoins.
Lawmakers expressed disappointment at the lack of government and corporate oversight of the country’s virtual asset market, which is one of the world’s most active markets by trading volume. According to a recent report, cryptocurrencies have become a major investment asset in South Korea, with the number of investors increasing to 10 million and exchanges such as Upbit and Bithumb generating trillions of won in revenue.
