Bithumb, South Korea’s second-largest cryptocurrency exchange, announced that a total of 620,000 Bitcoin was sent to 695 users due to an operational error during the event reward distribution.
Contrary to previous estimates of 2,000 $BTC circulating in the market, the extent of the erroneous distribution turned out to be much larger.
The exchange management announced that it froze transactions and withdrawals for the 695 accounts involved within 35 minutes of detecting the overpayment. According to the statement, 618,212 $BTC (99.7%) of the total 620,000 $BTC were recovered. It was also stated that 93% of the assets corresponding to the 1,788 $BTC that were sold were recovered. The company announced that the unrecovered portion would be covered by its own resources and that asset distribution processes would be redesigned to prevent a similar incident from happening again.
Bithumb also argued that the incident stemmed entirely from an internal accounting error, not an on-chain transfer. The excess balances appearing in user accounts were described as “ghost balances,” meaning they had no real counterpart on the blockchain. Therefore, while some users caused brief price fluctuations due to selling, no large-scale on-chain $BTC transfers occurred.
Changpeng Zhao (CZ), in a statement regarding the incident, indicated that they provided some support, however small, to the recovery process. CZ stated, “Initially, I didn’t share anything to avoid spreading FUD. Instead of $1,340, there was a human error involving $134 million. All airdrop features should have maximum value checks.” CZ also expressed uncertainty about whether such security checks were fully implemented across all portfolio projects.
The erroneous distribution of 620,000 $BTC by Bithumb, representing approximately 2.95% of the total Bitcoin supply, has caused widespread repercussions in the crypto community. According to previous reports in South Korean media, the exchange managed 42,619 $BTC at the end of the third quarter of last year. This suggests that the 620,000 $BTC in question was not a genuine on-chain asset transfer but merely an internal accounting error.
Most centralized exchanges (CEXs) do not process user balances on-chain in real-time; instead, they are managed through internal databases. On-chain transactions generally only occur for withdrawals. While this structure provides operational efficiency, the Bithumb example has shown that weaknesses in internal control mechanisms can lead to serious market fluctuations.
Following the incident, South Korean regulatory authorities reportedly launched an investigation, while Bithumb pledged to strengthen its internal control systems and implement multi-layered verification mechanisms in its reward distribution processes.
*This is not investment advice.
