South Korea’s Bithumb has admitted that serious internal control failures led to the accidental transfer of bitcoin worth more than $40 billion to customers, an incident that briefly disrupted trading and sparked renewed regulatory scrutiny.

Appearing before a parliamentary committee, CEO Lee Jae-won acknowledged that weaknesses in the exchange’s operational safeguards left its systems exposed and allowed the erroneous transaction to proceed. Most of the mistakenly distributed assets have since been recovered.

According to Reuters, the exchange credited users with 620,000 bitcoins instead of 620,000 won (roughly $428). The scale of the error — equivalent to about 15 times Bithumb’s reported bitcoin holdings of 42,000 BTC — caused bitcoin’s price on the platform to tumble by as much as 17% before accounts were frozen.

Lee said the breakdown stemmed largely from a 24-hour delay in processing transactions and slow updates to the exchange’s internal balance records, creating a mismatch between available holdings and transferred assets. He conceded that the platform’s safeguards, which were designed to ensure outgoing transfers matched actual reserves, failed in this instance. The assets were also not separated into a protected account prior to transfer, removing an additional layer of security.

“We are acutely aware of the deficiency in internal system control,” Lee told lawmakers.

Bithumb has since recovered the vast majority of the bitcoin. However, 1,786 BTC remain outstanding after being sold within minutes before the exchange halted activity, Reuters reported. Those customers are legally required to return the proceeds.

The incident has prompted action from South Korea’s Financial Supervisory Service (FSS), which said it will intensify oversight of “high-risk” practices that threaten market integrity. The regulator plans to examine large-scale price manipulation by major holders, irregular trading linked to suspended deposits and withdrawals, and coordinated pump schemes fueled by misinformation on social media.

The FSS also announced plans to develop advanced monitoring systems capable of detecting suspicious trading activity at second- and minute-level intervals, alongside artificial intelligence tools designed to analyze text data and flag potential market abuse.

Lawmakers voiced concern over gaps in both corporate governance and regulatory oversight in South Korea’s digital asset sector, one of the most active globally by trading volume. Cryptocurrency investment has become increasingly mainstream in the country, with an estimated 10 million participants and major exchanges such as Upbit and Bithumb generating revenues in the trillions of won.