South Korean lawmakers grill Bithumb over $40B in “ghost” bitcoin

According to Bloomberg, South Korean lawmakers questioned the leadership of crypto exchange Bithumb to determine how hundreds of thousands of BTC could appear in users’ accounts without being backed by the platform’s actual reserves. The issue was discussed at a committee hearing that also included representatives from financial regulators and law enforcement.

The incident stems from a Feb. 6 promotion involving “random boxes.” Regulators and the company said that, instead of small cash prizes (about 2,000 won, or roughly $1.40), some users were credited amounts denominated in BTC. The result was “ghost” balances in the exchange’s internal ledger: about 620,000 BTC, which at market prices was worth more than $40 billion.

Bithumb said 695 accounts were affected and 249 users actually opened the “boxes” and received the erroneous credits. Before the exchange restricted activity on the impacted accounts, 86 customers sold about 1,788 BTC. The platform also saw sharp price moves during the episode: bitcoin’s price on Bithumb briefly fell before recovering.

The exchange said the incident was caused by an internal mistake, not a hack, and that it recovered 99.7% of the assets distributed in error. Company representatives said they plan to compensate users for losses tied to panic selling during the disruption.

During the hearing, lawmakers focused on internal controls and transaction-approval procedures. Their questions centered on how the system could display BTC volumes far above actual reserves, and why the error in a promotional operation was not caught earlier.

Financial supervisors, for their part, are treating the episode as a case for tighter requirements on crypto exchanges. Regulators are discussing additional audits and changes to risk-management rules to ensure gaps between internal records and real assets do not trigger trading disruptions and customer losses.