• Bithumb accidentally gave away over $40 billion in Bitcoin, triggering a market sell-off.
• The exchange recovered 99.7% of the affected Bitcoin within hours of the incident.
• South Korea's financial regulators are now eyeing the incident for potential regulatory changes.

South Korean cryptocurrency exchange Bithumb reported that it mistakenly distributed more than US$40 billion worth of Bitcoin to customers, an error that sparked a significant sell-off on the platform. The exchange had intended to reward users with small cash bonuses of around 2,000 won (approximately US$1.40) but mistakenly credited over 2,000 bitcoins to winners instead, according to South China Morning Post and Channel News Asia.

Bithumb swiftly addressed the situation, recovering 99.7% of the 620,000 bitcoins mistakenly sent out and implementing a restriction on trading and withdrawals for the 695 affected customers within 35 minutes of the occurrence. The company emphasized that the incident was not due to external hacking or security breaches but was purely an operational error, as stated by BBC and India Times.

The mistake caused Bitcoin prices on Bithumb to drop by 17% to 81.1 million won, before later recovering to a trading price of 104.5 million won. Bithumb noted that the brief volatility led to some customers executing trades at unfavorable prices due to panic selling, as reported by South China Morning Post and BBC.

In the aftermath, South Korea’s financial regulators announced plans for an inspection of Bithumb to ensure compliance with operational standards. The Financial Supervisory Service stated that it aims to uncover any irregularities relating to the exchange's internal controls and virtual asset management practices. Bithumb has promised to cooperate fully with inquiries and plans to enhance verification systems and introduce AI to monitor transactions more effectively, according to India Times and Channel News Asia.