Bithumb CEO Lee Jae-won speaks during an emergency inquiry at the National Assembly’s National Policy Committee, Wednesday, over the massive bitcoin misallocation incident at the cryptocurrency exchange. Yonhap
Bithumb CEO Lee Jae-won acknowledged weaknesses in the cryptocurrency exchange’s internal control system in connection with its unprecedented bitcoin misallocation incident, pledging Wednesday to provide comprehensive compensation to affected users.
He said the country’s second-largest crypto exchange would determine the full scope of compensation based on complaints filed in the aftermath of the case, adding that losses stemming from panic-driven selloffs and forced liquidations would be eligible for relief.
“We deeply regret our failure to promptly detect abnormal increases in account balances caused by the erroneous distribution,” Lee said during an appearance before the National Assembly. “Monitoring mechanisms, alert systems and other internal safeguards were insufficient to quickly identify and address the problem.”
Regarding damage assessment, Lee said the exchange currently recognizes two primary categories for compensation — panic selling that occurred during the disposal of 1,788 bitcoins and some 30 cases of forced liquidation that followed.
“We will expand the scope of eligible recipients after reviewing complaints submitted through both the Financial Supervisory Service’s (FSS) inspection process and our customer support channels, and will complete the reimbursement process in a timely manner,” he said.
On Friday, Bithumb attempted to provide participating customers with bitcoin worth 2,000 won ($1.38) each as part of a promotional event. However, due to a staff error, participants were mistakenly credited with 2,000 bitcoins instead. In total, about 620,000 bitcoins were erroneously distributed. With bitcoin trading at around 98 million won at the time, the misallocation amounted to over 62 trillion won.
The incident has raised questions about how the exchange was able to issue and distribute bitcoins totaling about 14 times its actual holdings. As of its third-quarter report last year, Bithumb held only 42,800 bitcoins.
More concerning, some users were able to liquidate the mistakenly credited bitcoins for cash. Financial regulators and lawmakers have said the case goes beyond a simple clerical error, pointing to fundamental weaknesses in the exchange’s internal control framework and accounting infrastructure.
Lee said the employee responsible for the erroneous payout was a junior manager, acknowledging that the case exposed the lack of a robust multilayer approval system in the reward distribution process.
Source: Korea Times News
