South Korea’s Financial Supervisory Service (FSS) has reportedly initiated a formal investigation into Bithumb, a local cryptocurrency exchange, following a massive $40 billion accidental Bitcoin (CRYPTO: BTC) payout.
Regulators have informed Bithumb of the investigation, which began three days after an on-site inspection. The FSS has stated that it will take strict legal action against any activities that disrupt the market order, Yonhap News Agency reported on Tuesday, citing sources.
The investigation comes as lawmakers weigh new virtual asset legislation, with FSS Governor Lee Chan-jin saying concerns around “ghost coins” are a priority and that findings from the Bithumb probe will inform revisions to the pending bill.
The FSS did not immediately respond to Benzinga‘s request for comment.
Bithumb Recovers Majority Of Bitcoins, Apologizes
This investigation comes after a significant blunder by Bithumb. During a promotional ‘Random Box’ event on Friday, the exchange accidentally distributed over $40 billion worth of Bitcoins to customers, instead of small cash rewards, triggering a massive selloff.
Bithumb has since recovered 99.7% of the mistakenly distributed Bitcoins. Despite the recovery, 1,788 tokens had already been sold, sparking a sell-off on the exchange. Financial authorities identified 86 users who sold bitcoins through their Oji accounts.
Bithumb apologized for the incident, saying it is overhauling its asset payment process and strengthening internal controls to prevent a repeat, while stressing the issue was not caused by hacking or a security breach and did not affect customer assets.
The exchange told Yonhap it is directly contacting customers who received the Bitcoin and quickly sold it, urging them to return the funds and coordinating the recovery process.
Legal Implications Of The Blunder
The users, meanwhile, are reportedly considering cashing out and withdrawing their funds to their KB Kookmin Bank accounts. The FSS has warned that this incident could lead to a “disaster” and is urging Bithumb to return the funds before taking legal action, according to a report by News1.
Legal experts are split on whether recipients who sold the assets could face criminal charges, citing a 2021 Supreme Court ruling that cryptocurrency is not considered “property” under Korean criminal law.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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