According to reports, South Korean financial authorities have launched a formal investigation into Bithumb, the nation’s second-largest cryptocurrency exchange, after a catastrophic promotional error resulted in the accidental distribution of 620,000 “phantom” Bitcoin.
The Financial Supervisory Service (FSS) escalated its on-site review to a full-scale probe on Tuesday, February 10, 2026, seeking to determine how an internal accounting failure allowed the issuance of roughly $41 billion in assets that the exchange did not actually possess. The incident, which occurred during a routine “random box” event on February 6, saw an employee mistakenly credit users with Bitcoin instead of the intended Korean won (KRW), triggering a localised 17% flash crash as recipients began dumping the unbacked assets.
South Korea’s Crypto Firm Bithumb Accidentally Distributes $44 Billion in Bitcoin During Promotional Mishap.
The Seoul-based exchange said a system error during a Friday event briefly handed hundreds of customers massive crypto balances.
The incorrect allocations were quickly… pic.twitter.com/yVn2q9eqHJ
— The Executive Report 👔 (@Exec_report) February 9, 2026
FSS targets “ghost coin” risks and market manipulation
The FSS investigation focuses on the exchange’s “book-entry” trading system, which records transactions in internal ledgers rather than on the public blockchain. Regulators noted that Bithumb only held approximately 42,000 BTC in actual reserves at the time, meaning the accidental payout was nearly 15 times its total holdings.
FSS Governor Lee Chan-jin emphasised that such “ghost coin” incidents pose a fundamental risk to the virtual asset market and must be resolved before cryptocurrencies can be fully integrated into the legacy financial sphere.
Regulatory shift toward AI-driven market oversight
In the wake of the Bithumb crisis, South Korea has accelerated its 2026 crypto oversight plan, including the deployment of AI-powered surveillance tools to detect suspicious trading activity in real time. The FSS intends to use these systems to monitor “whale” activity, coordinated price manipulation, and schemes that exploit exchange disruptions, such as the localized volatility seen during the Bithumb error.
The Bithumb crisis spurred FSS AI oversight. This contrasts with institutional crypto exposure, where Tom Lee defends Bitmine’s $6B Ethereum losses as market volatility, challenging market integration.
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