South Korea’s Bithumb Probed by Lawmakers as CEO Blames Glitch for $40B Bitcoin Error

Bithumb, a South Korean crypto exchange, is now facing scrutiny from lawmakers in the country over an airdrop error of over $40 billion. The firm’s CEO blamed a system glitch when asked how this error occurred.

Lawmakers Press Bithumb CEO on Bitcoin Transfer Error

According to Bloomberg, South Korean lawmakers summoned the firm’s chief executive officer to answer questions over a mistake involving a transfer of $40 billion in Bitcoin due to human error.

During a hearing, parliamentarians asked CEO Lee Jae-won why the exchange lacks internal controls after an employee incorrectly sent customer payouts in the form of Bitcoin as opposed to won during a promotional event last week.

This mistake was made in the middle of a promotional airdrop on Bithumb. An exchange employee was to distribute 2,000 Korean won in prizes, but chose BTC instead. The glitch ended up sending approximately 2,000 BTC to each of those users. Some of these users immediately sold these coins, causing a crash in the BTC/KRW price on the exchange.

“Bithumb gave away Bitcoin that were not in the company’s possession, and that is what we call naked short selling,” Min Byeong-deok, a lawmaker said at the hearing.

Due to the incident, trading was halted shortly after on Friday as users attempted to sell their Bitcoins. The exchange has been trying to retrieve the lost funds. The Bithumb CEO pledged to improve regulations to ensure control of such situations.

“We sincerely apologize to the public who were deeply distressed by the erroneous overpayment in our promotional event,” Lee said.

System Glitch Blamed for Airdrop Blunder

The company further indicated that owing to the major flaws, the crypto exchange’s internal system made the exchange vulnerable to a possible sabotage situation, which did not prevent the transfer.

The second-most-popular crypto asset exchange in the country sent 620,000 coins to their customers instead of 620,000 won. Following this error, the price of Bitcoin crashed.

The Bithumb CEO explained that this was 15 times the exchange’s total of 42,000 BTC. This was mainly because the exchange takes around 24 hours to process all the transactions. This led to a delay in the count of the virtual assets.

“The exchange’s policy of checking the volume of currency to be transferred against its actual holdings had failed, and the amount was also not earmarked in a separate account to ensure the safety of the transaction,” Lee said.

The vast majority of the coins have been recovered by the exchange. However,  1,786 had already been sold within minutes before the exchange froze the accounts of the customers that received them.