①During an event on Friday evening this week, the South Korean cryptocurrency exchange Bithumb erroneously distributed 620,000 units of $Bitcoin (BTC.CC)$, causing significant volatility in the cryptocurrency's price; ②The actual amount of Bitcoin distributed far exceeded the quantity held by the exchange; ③South Korea's financial regulators classified this incident as a 'serious case exposing the vulnerabilities and risks of virtual assets' and initiated an on-site inspection of the exchange.
Cailian Press, February 8 (Editor Shi Zhengzhi) During this week’s major cryptocurrency volatility, the listing price of Bithumb, South Korea’s second-largest cryptocurrency exchange, plummeted to 81.11 million Korean won, equivalent to 55,000 US dollars, significantly lower than the market price. $Bitcoin (BTC.CC)$
The reason behind this shocking event was that the exchange mistakenly set the reward units as Bitcoin while distributing activity rewards.
(Source: Bithumb)
It is reported that the event in question was the 'Random Treasure Chest' activity scheduled to begin at 19:00 local time on Friday. The exchange originally intended to award participants prize amounts ranging from 2,000 to 50,000 won (equivalent to RMB 9.5 to 237 yuan), but mistakenly entered the unit as Bitcoin.
According to Bithumb’s disclosure, 695 participants used points to join the event, and 249 participants who opened their treasure chests were supposed to receive 620,000 won but instead received an airdrop of 620,000 Bitcoins, averaging 2,490 Bitcoins per person.
Based on the price of Bitcoin before the incident—98 million won/$67,000—the total value amounted to $41.5 billion/RMB 287.9 billion, with each individual receiving approximately $160 million/RMB 1.156 billion.
Incidentally, according to Bithumb's quarterly report, the number of Bitcoins erroneously airdropped far exceeded its actual holdings. As of the end of Q3 last year, Bithumb held only 42,600 Bitcoins in custody, sparking controversy over so-called 'ghost Bitcoins.'
Most of the Bitcoins have been recovered.
Bithumb’s post-incident review announcement stated that 20 minutes after the event began, it was discovered that “Bitcoin was being distributed.” It then took another 15 minutes to initiate procedures to block related account transactions/withdrawals, completing the emergency response by 19:40.
Fortunately, the vast majority of erroneously distributed Bitcoin were intercepted before entering the market, and the involved Bitcoin did not leak out to affect a broader market.
According to the latest disclosure from the exchange, 618,212 of the 620,000 mistakenly issued Bitcoin have been recovered. Following the incident, assets equivalent to 1,788 Bitcoin were sold off, of which the exchange has recovered 93%.
Currently, assets equivalent to 125 Bitcoin remain unrecovered, amounting to approximately $8.625 million (equivalent to RMB 59.8 million) based on the latest price of $69,000 per Bitcoin.
Fully compensate affected users
Very unfortunately, this incident also occurred during a recent continuous decline in Bitcoin prices, hitting a low of $60,000 on Friday evening. Many traders were unaware that the cause of the sharp drop was an error in inputting the unit for 'treasure chest rewards,' resulting in panic selling.
(Bitcoin trading price on Coinbase, source: TradingView)
In an announcement released late Saturday, Bithumb confirmed that as of 4:00 PM on Saturday, estimated losses caused by 'panic selling' among exchange users amounted to approximately 1 billion Korean won. The exchange announced full compensation for the price difference to customers who sold at low prices between 7:30 PM and 7:45 PM on Friday, along with an additional 10% compensation.
In addition, the exchange also announced a series of remedial measures, including improving the approval system for reward campaigns (with at least two or more approval stages) and enhancing the AI systems for detecting and automatically intercepting abnormal transactions.
Financial regulators hold emergency meetings over the weekend
As this absurd incident drew global attention, South Korean financial regulators dispatched an on-site inspection team to the Bithumb exchange to investigate the incident's details and determine whether any illegal activities occurred.
It was reported that the Financial Supervisory Service of South Korea held an emergency response meeting on Saturday morning, presided over by President Lee Chan-jin, and dispatched an on-site inspection team. The Financial Services Commission of South Korea, the Financial Supervisory Service, and the Financial Intelligence Analysis Institute also held an emergency meeting in the afternoon to discuss the accident situation and response plans. Lee Jae-won, representative director of Bithumb, attended the meeting.
Kwon Dae-young, Vice Chairman of the Financial Services Commission of South Korea, stated at the meeting: 'We regard this incident as a serious case exposing the vulnerabilities and risks of virtual assets. The Financial Supervisory Service must thoroughly assess the extent of user damages caused by this system failure, continuously monitor, and urge Bithumb to promptly implement measures for compensating affected users.'
Editor/Rocky
