FSS switches to full investigation of Bithumb, launches probe into 'ghost coins'

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[Financial News] The Financial Supervisory Service (FSS) has abruptly upgraded its response to the massive erroneous Bitcoin payouts at virtual asset exchange Bithumb, shifting from an on-site inspection to a formal investigation.
According to the financial authorities and industry sources on the 10th, the FSS notified Bithumb the previous day that it was launching an investigation and began the official probe on this day. This means the response was elevated to an investigation, with additional personnel deployed, just three days after on-site inspections started on the 7th, the day after the incident occurred.
The financial authorities will first examine how Bitcoin was paid out in an amount far exceeding Bithumb's actual holdings.
As of the third and fourth quarters of last year, Bithumb is estimated to have held about 40,000 to 50,000 Bitcoins. Nevertheless, more than ten times that amount—620,000 Bitcoins—was credited in its system, which has sparked controversy. Analysts say this was possible because centralized exchanges such as KRW market virtual asset exchanges process trades using a book-entry method that relies only on internal database numbers, rather than on the blockchain network on-chain.
Banks and securities firms commonly use a similar method to process large volumes of transactions quickly. However, this incident has exposed a vulnerability: large-scale asset transfers can occur based solely on internal database entries, regardless of the exchange's actual holdings.
The Act on the Protection of Virtual Asset Users requires virtual asset service providers to hold, in substance, the same type and quantity of virtual assets as those entrusted to them by users.
Meanwhile, the National Policy Committee of the National Assembly will convene a full session on the 11th to conduct an emergency inquiry into the Financial Services Commission (FSC), the Financial Supervisory Service (FSS), and the Financial Intelligence Unit (FIU). Bithumb's management is also expected to attend.
elikim@fnnews.com Kim Mi-hee Reporter