Bithumb faced scrutiny after a system glitch recorded 620,000 Bitcoin that did not exist on the blockchain, prompting regulatory inspections.
A technical failure at South Korea’s Bithumb exchange triggered regulatory concern after internal systems recorded 620,000 Bitcoin that did not exist on-chain.
The issue was detected on Friday during routine checks. Authorities now classify the event as a system design failure, not a human mistake, and have launched formal inspections.
Internal Ledger Error Created Non-Existent Bitcoin
Bithumb confirmed that a system malfunction caused its internal ledger to register Bitcoin balances without blockchain backing.
These entries were treated as valid assets inside the trading system. However, no corresponding transactions existed on the Bitcoin network.
At the time of the incident, Bithumb reportedly held about 175 Bitcoin as company assets. Customer wallets contained approximately 42,619 Bitcoin based on on-chain data.
Despite this, the internal ledger reflected an additional 620,000 Bitcoin.
The exchange blocked withdrawals linked to the false balances and paused trading activity once the discrepancy appeared.
Reconciliation checks later confirmed that the assets existed only within internal records.
Lawmakers Describe Structural System Failure
South Korean lawmakers reviewing the case said the issue showed weaknesses in exchange infrastructure.
They stated that internal systems should not allow assets to appear without blockchain confirmation. Officials stressed that this control failure raised investor protection concerns.
During a policy briefing, one lawmaker said the case “points to flaws in basic verification systems.”
The exchange focused on how it matched internal balances with blockchain data. Regulators noted that safeguards should detect mismatches earlier.
Authorities also questioned how the internal discrepancy reached such a scale. Current rules require clear separation of company assets and customer funds.
Lawmakers said the case may prompt stricter technical standards for exchanges.
Related Reading: Bithumb Recovers $40B in Bitcoin After Historic Airdrop Mistake
Regulators Begin On-Site Inspections and Review Sanctions
The Financial Services Commission and related agencies have started on-site inspections at Bithumb.
The review includes wallet management systems, accounting controls, and risk monitoring tools. Officials are also assessing whether reporting duties were met.
Regulators said possible actions include fines or operational directives. Sanctions will depend on inspection findings and system design flaws.
Authorities stated that exchanges must maintain accurate and real-time asset records.
The incident comes amid stronger oversight of digital asset platforms in South Korea. Regulators emphasized that blockchain-backed verification is essential.
Officials expect further updates after they complete the inspections.
Source: https://www.livebitcoinnews.com/bithumb-glitch-620000-fake-bitcoin-almost-traded-on-the-exchange/
