The South Korean National Assembly questioned Bithumb about the erroneous transfer of 620,000 Bitcoins worth $40 billion, 12 times its actual holdings, due to a system that only reconciled transactions once a day and lacked real-time prevention mechanisms.
The South Korean National Assembly sharply questioned Bithumb CEO Lee Jae-won at a hearing before the National Policy Committee on February 11, after the exchange mistakenly transferred 620,000 Bitcoin, more than 12 times its actual holdings. This error, worth approximately $40 billion, raised serious questions about lax internal controls and how such a serious incident could occur.
Lee Jae-won admitted that Bithumb only reconciles its internal ledger with the actual crypto assets once a day. The exchange collects transaction data for 24 hours, then adjusts the amount of actual assets the following day, meaning there is always a one-day gap in control. “We acknowledge that the cross-referencing system between the amount to be transferred and the amount held was not reflected in this incident,” he said.
Requires real-time system overhaul.
Lee Chan-jin, head of the Financial Supervisory Service of South Korea, argued that real-time verification should become a mandatory standard. “Even five minutes is not short, it’s very long,” he said , referring to Upbit, a rival exchange that performs asset reconciliation every five minutes. He urged lawmakers to include mandatory real-time system requirements in the next phase of the digital asset regulatory framework, emphasizing that only when physical assets and ledger balances are synchronized in real time can system security be guaranteed.
The core issue is that Bithumb stores all data in an internal ledger instead of directly on the chain, operating similarly to an internal spreadsheet. This delay allowed the exchange to transfer 620,000 Bitcoin that they didn't actually own. Lee Jae-won admitted the company lacked a mechanism to prevent this transaction in real time.
In the approximately 35 minutes before Bithumb froze the affected accounts, 86 users sold around 1,788 Bitcoin. This sudden wave of selling caused a temporary sharp drop in price on the platform and triggered forced liquidation of more than 30 users who had used Bitcoin as collateral. Lee Jae-won stated that the two biggest groups of losses were panic selling and forced liquidation, both of which are being XEM for compensation.
Lee Chan-jin described the entire incident as a “disaster” for the affected customers. Because the price of Bitcoin subsequently recovered, those forced to return the Bitcoin may now be facing losses. Bithumb stated that it has rectified 99.7% of the error by reversing the ledger entries and is in talks with approximately 80 customers who withdrew funds, offering them voluntary repayments in South Korean won to avoid litigation.
The exchange asserted that the incident was not related to an external attack and committed to redesigning its entire payment process and strengthening its internal control systems.
