In brief
- Lawyers say unjust-enrichment law favours Bithumb, but outcomes may hinge on whether users knew, or should have known, the payouts were a mistake.
- Prosecutors are expected to tread carefully, as the incident stemmed from an internal error rather than hacking or fraud.
- The episode is intensifying scrutiny of Korean crypto exchanges’ internal controls, with regulators signalling tighter ownership and oversight rules ahead.
Just days after mistakenly crediting users with billions of dollars worth of Bitcoin during a promotional event, South Korean crypto exchange Bithumb is weighing its options to recover the remaining funds.
The company is reportedly “in contact with customers who received Bitcoin,” particularly those who “disposed of it immediately,” in hopes of persuading them “to return and coordinate the method,” according to a rough translation of a report from state news agency Yonhap.
The incident stems from a promotional compensation event in which reward amounts were mistakenly entered in Bitcoin rather than Korean won, resulting in the distribution of roughly $43 billion in BTC on December 6.
Most of the credited assets were quickly frozen or reversed, but a portion was withdrawn or sold by users before the error was contained, prompting scrutiny from investigators and raising questions about recovery and liability.
While the development raises questions over fairness and the often industry-touted mantra that “code is law,” legal observers say the exchange’s strongest path forward may lie in civil recovery, with criminal liability remaining more complex.
“From an asset‑recovery perspective, Bithumb is on solid ground: there was never a contract promising hundreds of Bitcoin, the promo clearly envisaged small KRW rewards, and unjust enrichment law is designed for cases where people receive value with no lawful basis to keep it,” Joshua Chu, lawyer, lecturer, and co-chair of the Hong Kong Web3 Association, told Decrypt.
In such cases, recipients may attempt to invoke what Chu explained as a “change of position” defense, wherein it would be argued that “they relied on the apparent credit in good faith and irreversibly spent or moved the funds.”
But since Bithumb was able to resolve and recover the funds, publicly flagged the error and froze many accounts, “the real battleground will be whether each recipient was effectively on notice of the mistake before they acted on any of the windfall,” Chu said.
Criminal liability, however, would face a higher bar.
“In practice, prosecutors will be very cautious, because unlike a hack this started as Bithumb’s own mistake, and any viable charge would have to turn on clear evidence that particular recipients knew or ought to have known they were exploiting an obvious glitch,” Chu explained.
For some users, the episode raises an uneasy question: who benefits from finality when mistakes occur on centralized platforms?
Earlier in January, South Korea’s Supreme Court affirmed that Bitcoin held on exchanges can be treated as property subject to seizure in criminal cases.
This means prosecutors could “try to frame certain withdrawals as misappropriation, but they would need to prove the user knew it was an obvious mistake,” Chu said.
Earlier this week, Bitthumb CEO Lee Jae-won announced a compensation plan that includes a 20,000 won payment to affected users, full reimbursement plus a 10% bonus for those who sold Bitcoin at mistakenly low prices, and a week of zero trading fees. Lee confirmed that 99.7% of the overpaid Bitcoin has been recovered, with the remaining shortfall covered using company funds.
Patchwork policies
Local observers say the incident has exposed deeper gaps in oversight and internal controls across Korean crypto exchanges.
What happened could be viewed as “having caused a considerable level of damage to trust in internal control systems,” Siwon Huh, researcher at South Korean crypto analytics firm Four Pillars, told Decrypt.
Korean exchanges are “not under the direct oversight of financial regulators due to ambiguities in regulatory jurisdiction,” Huh explained, adding that this meant systems such as payment obligation verification have not been mandated.
“Real-time asset verification frameworks are also not standardized; each exchange applies different standards, yet most retail investors are unaware of this,” he said.
Policymakers are already moving to tighten the frameworks governing exchanges, with discussions underway to “cap major shareholders’ stakes in crypto exchanges at 15 to 20 percent, citing inadequate internal control systems,” Huh noted.
“Korea has been phasing in crypto-related legislation under the name ‘Virtual Asset User Protection Act,’ which is currently at its first stage,” he said. “During the second phase of legislation, provisions related to internal controls and proof-of-reserves systems are expected to be substantially strengthened.”
What happened at Bithumb would likely speed up efforts to pursue those provisions, Huh explained.
The “aggressive” moves signal “a willingness to intervene in exchanges’ internal ownership structures even at the cost of industry contraction” and are creating “considerable repercussions,” he added.
Bithumb did not immediately return Decrypt’s request for comment.
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