South Korea's Financial Supervisory Service (FSS) has formally initiated sanctions procedures against the major cryptocurrency exchange Bithumb following a significant erroneous Bitcoin overpayment incident earlier this year. According to a report from Newsis, the regulator sent an inspection findings notice to the exchange after discovering that a system malfunction led to a staggering overpayment of 620,000 Bitcoin—far more than the approximately 42,000 Bitcoin the exchange actually held at the time.
The FSS has requested Bithumb's explanation before drafting final disciplinary measures. After receiving the response, the agency will issue a prior notice of sanctions and then submit the case to its sanctions deliberation committee. Possible outcomes range from a warning to fines or more severe administrative measures, depending on the severity of the violation and the exchange's cooperation. Bithumb stated that the overpaid Bitcoin was quickly identified and recovered, but the incident raised serious questions about internal controls and risk management.
In a separate but related development, Bithumb has rejected a consumer dispute mediation proposal from the Korea Consumer Agency's Consumer Dispute Mediation Commission. The proposal would have required the exchange to pay approximately 3 billion won ($2.2 million) in compensation to users affected by an unauthorized automated trading (API) incident earlier this year. The commission had ruled that Bithumb should waive trading fees of 100,000 won for each claimant. Bithumb's rejection now opens the door to civil litigation, potentially lengthening the dispute and setting a legal precedent.
These events increase regulatory and legal uncertainty for Bithumb at a critical time. The exchange is seeking renewal of its virtual asset service provider (VASP) registration under South Korea's Specific Financial Information Act and is also targeting an initial public offering (IPO) by 2028. Continued scrutiny and unresolved litigation could delay the VASP renewal and undermine investor confidence, threatening the IPO timeline. The cases highlight the growing regulatory oversight of cryptocurrency exchanges in South Korea and may influence how similar disputes are handled in the future.
