South Korea’s Bithum admitted Wednesday that severe flaws left the trading platform’s internal system wide open to potential sabotage and that it failed to prevent the mistaken transfer of $40 billion in bitcoin to customers, according to Reuters.
The blunder, which triggered the price of bitcoin to plunge by 17% on Bithumb, according to Reuters, consisted of the country’s second-largest crypto trading platform accidentally giving away 620,000 bitcoins to customers instead of just 620,000 won (roughly $428).
The Financial Supervisory Service said Sunday it will start investigations into “high-risk” practices that undermine market order, including large-scale price manipulation by so-called whales, trading schemes tied to suspended deposits and withdrawals and coordinated pump tactics fueled by social media misinformation. The watchdog also said it plans to build tools that automatically extract suspicious trading patterns at the second and minute levels, alongside text-analysis systems using artificial intelligence to flag potential market abuse.
Bithumb CEO Lee Jae-won said the giveaway amounted to 15 times the crypto trading platform’s 42,000 bitcoins, mainly due to a 24-hour lag in processing transactions and delayed updates to its crypto holdings balance. “We are acutely aware of the deficiency in internal system control,” Lee told a parliamentary committee hearing recently.
The CEO admitted that Bithum’s policy of ensuring the volume of assets to be transferred matched its actual holdings failed, and that the amount was not earmarked in a separate account to ensure the transfer’s safety.
The exchange has recovered most of the bitcoin, although 1,786 that were sold within minutes before the exchange froze customers’ accounts are still missing, the Reuters report added. The customers who sold those missing bitcoin are legally bound to return them.
Members of parliament expressed dismay at the lack of government and corporate oversight in the country’s virtual assets market, which is one of the most active in the world by trading volume. According to a recent report, cryptocurrency has become a primary investment asset in South Korea, with investor numbers rising to 10 million and exchanges such as Upbit and Bithumb generating revenues in the trillions of won.
