620,000 Bitcoin 'phantom deposits'... A 20-minute error triggered a massive regulatory overhaul.
A simple "input error" surrounding Bitcoin (BTC) is shaking up the regulatory framework for the entire Korean virtual asset market. A small-scale promotion on Bithumb escalated into an unprecedented incident, with 620,000 "phantom Bitcoins" appearing in customer accounts over a 20-minute period due to an internal computer error. Financial authorities have solidified their stance on centralized exchange systems, taking them to a banking level.
In early February 2026, Bithumb ran a promotion offering small rewards as usual. It was a common marketing event, awarding each customer around 2,000 won in Korean Won or points. However, a critical error occurred during the internal input process, incorrectly setting the value to Bitcoin instead of Korean Won. For approximately 20 minutes, the exchange's internal ledgers reflected hundreds of thousands of Bitcoins as "deposits" across hundreds of accounts.
Although no actual on-chain transfers occurred, Bitcoin balances appeared to increase on-screen, and some users immediately executed sell orders. Before Bithumb completely shut down its system, transactions based on "phantom Bitcoin" amounted to approximately 1,788 BTC. Recognizing the problem, Bithumb immediately froze the account and reversed all incorrectly reflected balances. They later explained that they recovered 93% of the losses using Korean Won and other coins. While this appeared to be a mere "happening," financial authorities saw things differently.
Ghost Bitcoins that operate on a "private ledger" rather than on-chain.
This incident drew particular attention because it exposed the structural vulnerabilities of centralized exchanges. Centralized exchanges, including Bithumb, do not record all transactions on the blockchain in real time. User buys and sells are initially reflected only in the exchange's internal database, or "private ledger," and actual on-chain asset movements are bundled and processed at the time of withdrawal or deposit.
This structure allows for fast settlement, high liquidity, and low fees, but it relies on the accuracy of the internal ledger. Customers must trust that the numbers displayed on the screen correspond one-to-one with their actual holdings. However, Bithumb printed a massive amount of non-existent Bitcoin on its ledger due to a single input error.
According to regulatory disclosures, Bithumb held only 175 BTC in its own holdings as of the third quarter of 2025. Conversely, the amount of Bitcoin held and held in custody as customer assets reached 42,619 BTC. Given the exchange's small holdings, and its reliance on secure management of customer assets and sophisticated accounting, the fact that "uncollateralized balances" were recorded in internal ledgers, even momentarily, and even actual transactions were conducted, has raised the alarm of financial supervisory authorities.
FSS determines that this is a "system error," not a simple input error.
The Financial Supervisory Service (FSS), the financial supervisory authority, immediately launched an on-site inspection. The key question was how a non-existent asset became tradable. Rather than the input error itself, the issue was the structural flaw that allowed the incorrect data to pass through the order and settlement system without any intervention, leading to actual transactions.
The questions raised by the regulators are straightforward: how could an asset not even held by the exchange be placed as a sell order? Why didn't automatic blocking or separate approval procedures work when a sudden, large Bitcoin deposit occurred on the internal ledger? And who would be held accountable for the users who benefited from it and the entities that incurred the losses?
The Financial Supervisory Service (FSS) also indicated that it would initiate a formal investigation and sanctions if necessary based on the results of its on-site inspection of Bithumb. This incident has highlighted the fact that existing virtual asset regulations are largely focused on superficial aspects such as anti-money laundering (AML), prevention of market manipulation, and the segregation of deposited assets, while leaving significant gaps in exchanges' internal systems and bookkeeping.
Industry-wide warning of 'internal control' risks
The repercussions of the ghost bitcoin incident immediately spread throughout the industry. The Digital Asset Exchange Alliance (DAXA), comprised of major domestic exchanges, initiated a comprehensive review of internal controls and accounting systems across its member companies in the wake of the Bithumb incident.
Some in the National Assembly and regulatory authorities have criticized centralized exchanges, stating that while they have already matured to the level of financial infrastructure, their operational, security, and accounting systems remain at a startup level. Furthermore, given the fact that domestic virtual asset trading volumes surge overnight due to their correlation with overseas markets, particularly the US time zone, concerns are being raised that a single exchange's outage or error could instantly have a domino effect on global prices and liquidity.
This incident ultimately served as a realistic example of "systemic risk," where a single exchange error can impact the stability of the entire domestic virtual asset ecosystem beyond the level of a specific platform.
Who is responsible? The legal issues surrounding erroneous balance transactions.
The most sensitive issue concerns the legal implications of transactions based on incorrectly generated balances. Some users immediately sold the Bitcoin displayed on their screens, converting them into Korean won or other coins. Exchanges later recovered the funds or filled the gaps with their own funds.
Regulators and legal experts believe that profits based on clear system errors under relevant laws may be considered unfair profits, and that the exchange may later claim and recover such profits.
This process also revealed a contradiction. While the balance displayed on the exchange screen appears to users as a "confirmed right," incorrect balances due to system errors can be canceled or corrected at any time. Ultimately, it was reaffirmed that "numbers" on a centralized exchange are not the on-chain assets themselves, but rather a claim or claim against the exchange's internal systems.
"Tier 2 Regulation" Requires Bank-Level Bookkeeping
The authorities are signaling a shift toward elevating virtual asset regulation to "Level 2" following this recent ghost bitcoin incident. While regulations have previously focused on external safeguards like anti-money laundering, market manipulation, and customer asset segregation, they will now address internal bookkeeping and operational risk control, similar to those in banking.
The directions being discussed can be broadly summarized into four points.
First, when accumulating funds or coins in customer accounts through promotions, events, etc., this is a measure to mandate multi-step approval and double-verification procedures rather than relying solely on automatic input.
Second, this is a plan to frequently compare and verify internal ledger balances with actual on-chain assets held at a certain interval, and to announce the results to the market through external audits or public disclosures.
Third, in the event of an erroneous transaction due to an error, detailed standards will be established to define in advance the scope of responsibility between the exchange, users, and third parties, including the procedures for correction, cancellation, and compensation.
Fourth, regulatory overhaul aims to bring internal accounting systems and risk management systems as close as possible to the auditing and disclosure standards of banks and securities firms. This means that regulation will focus on the underlying infrastructure itself, rather than simply on which coins are listed or what events are held.
The scars on trust in centralized exchanges remain.
Bithumb is also credited with preventing the spread of the situation through swift account freezing, rollbacks, and loss recovery measures. However, the psychological shock of users realizing that their Bitcoin balances displayed on their screens could be overturned at any time due to system errors is unlikely to subside easily.
This phantom Bitcoin incident is significant not because of the sheer scale of the numbers, but because of the vulnerability of the "invisible accounting system" that generates them. No matter how transparent blockchain technology may be, the moment assets pass through the gateway of a centralized exchange, they ultimately become dependent on the ledgers of a closed system. A single glitch in that ledger reveals that billions of dollars worth of Bitcoin transactions can be instantly executed on "phantom" data.
Korean financial authorities are interpreting this not as a simple operational error, but as a structural warning about the reliability of exchange ledgers. In the future, in the Bitcoin and virtual asset markets, the integrity of exchanges' internal accounting systems, alongside on-chain records, is likely to emerge as a key regulatory and trust standard.
Exchange Ledger Risk: Now is the Era of 'Reading and Avoiding Investors'
The recent Bithumb phantom Bitcoin incident is not a simple incident, but a stark example of how vulnerable the "private ledgers" of centralized exchanges are and how that risk can be passed on to investors.
In a system where the numbers displayed on the screen can be "rolled back" at any time, where assets that the exchange doesn't actually own are sold, and where all the responsibility can be passed on to post-sale disputes, what investors need now is not just coin information, but **the power to understand the trading infrastructure itself**.
In this environment, TokenPost Academy goes beyond "coin selection" to focus on cultivating **investors** who can read exchange structures, ledgers, and risks and defend themselves.
◆ Why Token Post Academy now?
An era where a single "input error" on a centralized exchange can lead to hundreds of thousands of Bitcoin phantom balances.
- A market that requires understanding not only on-chain data but also **exchange internal ledger structure and risk management** to survive.
- A transition period for financial authorities to move to the second phase of regulation, which requires "bank-level bookkeeping."
TokenPost Academy provides a curriculum that explores **the structure behind numbers**, based on this premise.
◆ TokenPost Academy Curriculum: A 7-Step Masterclass to Understand "Systems," Not "Numbers"
Step 1: The Foundation
The moment you place your assets on an exchange, your coins become numbers on the exchange's ledger, not on-chain.
- Understand wallet security, deposit/withdrawal structure, and the difference between exchanges and your own wallet to strategically decide **where and how much to deposit**.
- Learn how to avoid **a single mistake that could result in your account being frozen or exposing you to tax risks** by understanding the domestic tax and regulatory environment.
Step 2: The Analyst (Valuation and Analysis)
As in this case, even if the "exchange ledger" is distorted, prices still move. Ultimately, someone ends up trading on the flawed structure.
- Through tokenomics and on-chain data analysis,
- Identify **off-the-books risks** in advance, such as insider volume, inflation, and lockup release schedules.
- Using market cycle indicators such as **MVRV, NUPL, SOPR**,
- Learn strategies to avoid periods of fear and greed coupled with exchange risk.
Step 3: The Strategist (Investment Strategy and Portfolio)
Portfolio design that takes into account centralized exchange risks is essential.
- Adjusting the weight by exchange and asset, and distributing cash, coins, and stablecoins.
- Designed to **prevent a single exchange outage or ledger error from shaking up my entire portfolio**.
Step 4: The Trader (Technical Analysis and Trading)
Even when the numbers are wrong, the chart moves.
- Understand the order book, order types, and execution structure.
- Develop an eye for detecting **something unusual** through abnormal spreads and trading patterns.
- Through real-world trading demonstrations, you will learn **how to immediately reduce risk the moment an abnormal signal appears in the exchange system**.
Step 5: The DeFi User (Decentralized Finance)
One of the most realistic ways to reduce centralized exchange ledger risk is to **move some assets to on-chain DeFi**.
- Learn about staking, lending, and liquidity provision (LP) structures.
- Learn how to **invest directly against contracts and protocols** on-chain, not just through exchange deposits.
- Understand impermanent loss, LTV, and liquidation structure.
- Learn how to compare "exchange risk vs. protocol risk" and create a **diversification strategy that's right for you**.
Step 6: The Professional (Gifts and Options)
In system failure situations such as phantom balances, leveraged positions are the first to be sacrificed.
- Understand leverage/margin structure, funding fee, and liquidation mechanism.
- **Establish criteria for reducing leverage or not entering at all in areas with high exchange system risk**.
- Through a hedging strategy using options,
- Build a **portfolio defense line** even in areas where regulatory and accounting risks increase.
Step 7: The Macro Master (Macroeconomics and Market Cycles)
As with the recent Bitcoin phantom incident, we live in an era where a single event can change regulatory direction and market structure.
- Through global liquidity, Bitcoin cycles, and past crises,
- Train yourself to structurally read **"What events lead to regulatory level 2 (bank-level bookkeeping)"**.
- Reviewing past portfolio update cases,
- Learn how to **actually reduce and shift positions** based on regulatory changes and trading infrastructure risks.
◆ A place to learn about 'systems', not numbers
This Bithumb ghost bitcoin incident,
- It's not just a matter of "which exchange is risky",
- This is a case that asks **"How should we understand the entire centralized transaction infrastructure, and how much should we entrust it to?"**
TokenPost Academy is not a coin recommendation,
- We provide education that fosters **'Risk Literacy'** that permeates exchanges, on-chain, and the macro environment.
In the Korean virtual asset market, which is entering the second phase of regulation in 2026,
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🔎 Market Interpretation
- Bithumb's 'ghost BTC' incident, which appeared to be a simple mistake, was perceived by Korean regulators as an incident that revealed a structural risk in the reliability of internal ledgers.
- While most of the transactions themselves were offset and settled within the internal system, and external on-chain leakage was not significant, the fact that "it was possible to trade assets that were not actually held" undermined trust in the centralized exchange model as a whole.
From an investor's perspective, exchange risks (operations, systems, and governance) are once again highlighted, prompting a re-examination of asset storage, transaction frequency, and withdrawal strategies.
💡 Strategy Points
- Balance Diversification: Rather than concentrating assets on a single exchange, it is advisable to diversify them across major domestic and international exchanges, cold wallets, and DeFi to reduce single exchange risk.
- Regular withdrawal habits: For long-term holdings that are not for short-term trading purposes, a strategy is needed to regularly withdraw to a personal wallet (cold/hardware wallet, etc.) to convert "exchange claims" into "direct ownership."
- Exchange Risk Checklist: Select a primary exchange by comprehensively comparing the presence of real-name accounts, real-time or periodic disclosure of Proof of Reserves, external audits, accident history and compensation cases, and internal control and security certifications (ISO, ISMS, etc.).
- Caution when participating in events: If a large sum of money is suddenly secured due to an airdrop, reward, or event, rather than immediately selling in large quantities, a conservative attitude of checking the notice or customer service center before responding will reduce risk in the long term.
- Monitoring regulatory changes: This incident is likely to lead to stronger internal controls and audit requirements at the bank level in Korea. Changes in regulations for listed coins, the Korean won market, and derivatives can directly impact liquidity and price volatility, so it's essential to monitor domestic regulatory trends.
📘 Glossary
Ghost Bitcoin: A virtual Bitcoin that doesn't exist on the actual blockchain, but appears as a balance on the user's screen due to an internal exchange data error. It's simply a "number on the ledger" with no physical backing (on-chain assets).
Internal Ledger: A private database where a centralized exchange records each user's deposits, withdrawals, and transaction history. Most transactions are processed solely on this internal ledger, and actual on-chain movements are reflected only upon deposits and withdrawals.
On-chain Settlement: The process of transmitting and recording transaction results on the actual blockchain network to confirm asset transfers between wallets. Due to speed and fee burdens, centralized exchanges often process this process in batches.
Fat-finger Error: This refers to an incident where an abnormal order or incorrect quantity or price is entered due to a human typo or input error. This has caused numerous major incidents in both traditional finance and cryptocurrency markets.
- Reserves and Custody: The exchange holds customer assets on your behalf (custody), and the coins and cash it holds to back them are called reserves. If reserves are insufficient or the ledgers are inaccurate, it becomes difficult to respond to simultaneous withdrawal requests, similar to a "bank run."
💡 Frequently Asked Questions (FAQ)
Q.
What does the "ghost bitcoin" incident on Bithumb mean for investors?
This incident demonstrates that the balance displayed on a centralized exchange screen does not directly reflect actual holdings on the blockchain. Because exchanges first record data in their internal databases and then settle on-chain, even a system error or input error can temporarily cause nonexistent assets to be traded. Investors should view exchanges as mere "transaction windows" and manage their risk by diversifying long-term holdings into personal wallets to reduce their reliance on exchanges.
Q.
How are Korean regulations likely to change after this incident?
While Korea already had Level 1 regulations in place, including real-name account requirements and anti-money laundering, this incident has sparked discussions on Level 2 regulations, which focus on internal bookkeeping and system control. These could include multi-authorization procedures for entering promotions and rewards, frequent reconciliation of internal books with actual reserves, legally mandated correction and compensation procedures for erroneous transactions, and enhanced external audit and disclosure requirements, comparable to those of banks. Consequently, exchanges will likely be required to adhere to internal control standards similar to those of banks, and users will likely trade under even stricter oversight.
Q.
How can investors safely use exchanges on their own?
First, it's best to diversify your assets across multiple exchanges and personal wallets rather than concentrating them on a single exchange. Second, when selecting an exchange, check for real-name account partnerships, security verification, a history of accidents, and proof of reserves. Third, if an unusually large amount of money is received through rewards or airdrops, it's safer to verify the authenticity through notices and customer service rather than immediately trading. Finally, moving long-term coins to non-custodial wallets like hardware wallets and leaving only the necessary liquidity on the exchange significantly reduces risk.
TP AI Precautions
This article was summarized using a TokenPost.ai-based language model. Key points in the text may be omitted or inaccurate.
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