The Financial Supervisory Service switched to an inspection just three days after an on-site check in connection with Bithumb's large-scale erroneous Bitcoin payouts. While an on-site check aims to identify the situation and correct mistakes, an inspection seeks to uncover illegal acts and impose penalties, such as disciplinary action against executives and employees.
According to the financial authorities on the 10th, the Financial Supervisory Service (FSS) gave prior notice to Bithumb the previous day of the start of an inspection and began a formal inspection starting that day. It came three days after it launched an on-site check on the 7th, the day after the incident. Considering the seriousness of the matter, the FSS signaled a tough inspection, including deploying additional inspection personnel. The FSS is closely examining how a volume far exceeding the amount of Bitcoin actually held by Bithumb was paid out.
Centralized exchanges (CEX) such as Bithumb operate on a "book transaction" basis, in which coins deposited by customers are kept in the exchange's own wallets, and only ledger balances are changed without recording each trade directly on the Blockchain. As of the end of the third quarter last year, Bithumb held about 42,000 Bitcoins, of which 175 were company-owned and the rest were entrusted by customers. Bithumb's current Bitcoin holdings are estimated at about 46,000.
The FSS is focusing on how 620,000 were paid out—about 14 times Bithumb's holdings. It is also checking a possible violation of the Act on the Protection of Virtual Asset Users, which requires virtual asset business operators to substantially hold the same type and quantity of virtual assets as those entrusted by users.