Rebecca Cruz South Korea investigates Bithumb after mistakenly crediting 620,000 Bitcoin worth $43 billion, reigniting global concerns over paper Bitcoin risks and centralized exchange transparency.
South Korea probes Bithumb as phantom Bitcoin payout sparks paper Bitcoin fears
South Korea has opened an investigation into Bithumb after one of the country’s largest crypto exchanges mistakenly credited an astronomical amount of Bitcoin to its users. The bizarre event, which temporarily inflated account balances by over $43 billion worth of Bitcoin, has rattled investor confidence and reignited global debate over the issue of paper Bitcoin within centralized trading platforms.
The Financial Supervisory Service of South Korea has confirmed that it launched an immediate investigation into Bithumb following the exchange’s admission that it erroneously credited 620,000 Bitcoin to user wallets. The incident, while swiftly contained, has prompted regulators to question the integrity of exchange controls and data systems across the country’s crypto sector.
A $43 billion glitch that shook the crypto market
Bithumb’s technical misstep began during a promotional event designed to reward customers with a small cash bonus of 2,000 South Korean won. However, a back-end error allegedly caused one employee to input the wrong unit of currency, leading the system to distribute Bitcoin instead of won. As a result, thousands of user accounts reflected massive holdings of phantom Bitcoin that never existed on the blockchain.
The exchange clarified that most of the phantom Bitcoin credits were reversed within hours, but around 125 Bitcoin—worth roughly $8.6 million remained unsettled. This gap has sparked regulatory scrutiny and raised questions about operational risks in centralized exchanges, particularly those that handle customer balances without transparent onchain reconciliation.
Officials from the Financial Supervisory Service stated that they are investigating whether the incident points to deeper systemic problems. They cited mismatches between the Bitcoin held in Bithumb’s wallets and the balances displayed to users, as well as internal control deficiencies that allowed a single point of failure to trigger such a massive accounting error.
Paper Bitcoin debate intensifies amid investigation
The Bithumb episode has re-energized global discussion around paper Bitcoin a term describing Bitcoin that exists only within exchange databases but is not actually backed by real coins on the blockchain. Analysts warn that the spread of paper Bitcoin could distort true supply dynamics, undermine market trust, and contribute to liquidity risks during times of volatility.
According to CryptoQuant analyst Maartunn, the 620,000 Bitcoin credited to users were purely digital entries inside Bithumb’s internal system. He explained that while Bithumb’s public reserves stand at around 41,798 Bitcoin, the glitch temporarily created the illusion of holdings nearly fifteen times that amount.
Onchain data revealed that roughly 3,875 Bitcoin were withdrawn from Bithumb during the same period, totaling about $268 million. While it remains unclear how much of that was linked to the mistaken crediting, the pattern suggests that some users managed to move funds off the exchange before balances were corrected. Others may have withdrawn legitimate funds amid growing distrust of centralized platforms.
The incident comes at a time when Bitcoin’s price has already fallen nearly 43 percent since late 2025, deepening anxiety over opaque trading instruments and derivative products that represent Bitcoin without holding real coins. Critics argue that such synthetic Bitcoin activity dilutes the asset’s scarcity narrative and could contribute to price suppression during major selloffs.
Regulators tighten focus on exchange integrity
South Korea’s regulators are now signaling a tougher stance toward exchanges that fail to meet stringent internal control standards. The Financial Supervisory Service has warned that it will pursue legal actions against any activity that undermines market order or investor confidence. Officials have emphasized that the Bithumb case is not just a technical mishap but a reflection of weaknesses in centralized custody systems that handle user assets.
For Bithumb, the incident could not have come at a worse time. The exchange has been working to rebuild its reputation after years of operational setbacks, security incidents, and management controversies. While the company insists that no customer assets were ultimately lost, the phantom Bitcoin event underscores the fragility of centralized accounting systems in a market built on the promise of decentralized transparency.
Market observers believe that South Korea’s probe could become a defining case for future exchange oversight in Asia. If regulators impose stricter proof-of-reserves requirements or mandatory real-time auditing, the move could accelerate the industry’s shift toward onchain verification tools and decentralized exchange alternatives.
What the Bithumb probe means for global crypto trust
The fallout from South Korea’s probe into Bithumb extends beyond national borders. The phantom Bitcoin event has reignited the global debate about how much Bitcoin truly exists within centralized platforms and whether investors can trust the balances displayed in their accounts.
As crypto investors push for transparency and proof of solvency, exchanges may soon face mounting pressure to adopt verifiable auditing frameworks. The phantom Bitcoin saga serves as a stark reminder that in a market where billions of dollars can appear out of thin air, trust must be earned onchain.
Disclaimer: Parts of this article were generated with the assistance from AI tools and reviewed by our editorial team to ensure accuracy and adherence to our standards.
