South Korea's FSS cautions Bithumb users about fraudulent URLs in compensation messages

The South Korean financial watchdog, FSS, has cautioned Bithumb customers about clicking URLs in compensation messages, warning that those links are fraudulent. The exchange also cautioned customers about ongoing smishing scams that impersonate compensation notices to lure victims into downloading malicious software.

The South Korean Financial Supervisory Service (FSS) has urged Bithumb users to remain on high alert amid an ongoing scam exploiting the recent Bitcoin transfer error at Bithumb.

The regulator and the crypto exchange warned customers not to click any URLs in compensation notices, saying all links are fraudulent because the exchange has not yet announced the timeline for its planned compensation program.

Korea’s FSS alerts Bithumb customers over ongoing smishing attacks

On February 12, a local news outlet reported that the South Korean regulator had issued an alert about a surge in URL smishing attacks targeting Bithumb customers. The URLs lead unsuspecting victims to automatically download and install a malicious application that allows scammers to access their personal information and steal their digital assets.

The FSS advised victims that if they accidentally installed a malicious application after clicking a URL, they should immediately enable airplane mode and reset their affected mobile devices. The regulator also encouraged the victims to report the matter to a police station.

Bithumb accidentally sent 620,000 Bitcoins to customers on Friday last week, worth more than $40 billion. The error occurred amid the exchange’s program to issue a small cash reward of 2,000 won ($1.37) to 655 customers.

However, the exchange’s employee entered the value in BTC and sent out 2,000 Bitcoin to each account, briefly making the customers crypto millionaires.

Bithumb apologized for the mistake, adding that it quickly realized its mistake and recovered almost all the missing funds. The exchange restricted trading and withdrawals for the 695 affected customers within 35 minutes of the error. 

Following the incident, the FSS staff held an emergency meeting the following day. It said they will investigate the incident for any signs of illegal activity, which may prompt formal investigations. Bithumb said it will comply with regulators and use the incident as a learning experience to prioritize customer trust and peace of mind rather than external growth. 

South Korea’s FSS Governor Lee Chan-jin urges customers to return wrongly sent Bitcoin

Cryptopolitan reported on February 9 that the Governor of the FSS, Lee Chan-jin, urged Bithumb users to return the assets the exchange accidentally sent them during the incident. He also said that users who sold the Bitcoin after the error without Bithumb’s confirmation would be obligated to return the assets.

86 users sold about 1,788 Bitcoins after the error, with some users transferring some of the proceeds to their bank accounts. The company said it had recovered 99.7% of the mistakenly sent Bitcoins.

After the incident, the massive sale of mistakenly transferred Bitcoins caused Bithumb’s BTC price to drop by over 10% compared to other exchanges. The price drop instilled fear among some users, who panicked and sold their Bitcoin, adding to selling pressure on the crypto asset on the exchange.

Other users (about 30) who had used their Bitcoin as collateral for investments in other digital assets had their holdings forcibly liquidated or margin called.

The exchange announced it will refund users who panicked and sold their holdings with 110% of their realized losses and give each user who accessed the exchange during the incident 20,000 won (approximately $14). Bithumb also plans to waive trading fees, among other measures, to compensate customers for the inconvenience.

South Korean MPs questioned Bithumb CEO in a Parliament hearing on February 11 over the incident, according to a previous report by Cryptopolitan.

The CEO acknowledged that the exchange had sloppy internal systems that allowed the error to take place. He told MPs of the National Policy Committee that Bithumb reconciles its internal ledger with actual crypto assets only once per day, implying that the exchange essentially collects transaction data for 24 hours, then adjusts its real holdings the next day, leaving a full-day blind spot. 

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