Legal Dilemma: Bithumb’s $40 Billion Bitcoin Blunder and the Quest for Asset Recovery

Bithumb’s $40 Billion Bitcoin Blunder: Legal Quandaries Loom

SEOUL, South Korea — In a shocking turn of events, Bithumb, Korea’s second-largest cryptocurrency exchange, mistakenly issued a staggering $40 billion in Bitcoin payouts to its users. The incident has raised pressing questions about the legal ramifications for those who received the windfall and whether the exchange can reclaim the funds.

On February 9, a pedestrian was seen passing the Bithumb Lounge in Gangnam District, unaware of the chaos unfolding within the cryptocurrency platform. Of the 620,000 Bitcoins erroneously distributed to 249 users, an impressive 99.7 percent—618,212 Bitcoins—were recovered before they could be sold or transferred. However, 1,788 Bitcoins were sold or transferred, with Bithumb managing to recover 93 percent of those. Yet, approximately 126 tokens, valued at around 13 billion won ($8.9 million), remain unaccounted for.

Bithumb has begun reaching out to the recipients of the mistakenly issued Bitcoin, seeking to retrieve the assets. The company is contemplating legal action if recovery proves challenging, but the path forward is fraught with uncertainty.

Legal Perspectives on Recovery

From a legal standpoint, recovery appears feasible through civil proceedings. Experts suggest that the erroneous Bitcoin payout can be classified as an erroneous transfer, and Bithumb could potentially win a lawsuit for unjust enrichment. Given that the exchange had specified event prizes ranging from 2,000 won to 50,000 won, it is easier to demonstrate that the amount received—100 million times the announced prize sum—was illicit.

“Any monetary gain without legal grounds constitutes unjust enrichment,” stated Kim Sang-gyun, a lawyer at J&K. “Given that Bitcoin worth hundreds of billions or even trillions of won are clearly not event prizes, the funds must be returned under civil law.”

However, the situation becomes more complex when considering the potential for criminal charges. Legal experts warn that withdrawing the mistakenly issued tokens in cash could lead to criminal liability, drawing parallels to the infamous 2018 Samsung Securities “ghost shares” incident, where employees sold mistakenly distributed shares and faced legal consequences.

Supreme Court Precedents and Challenges

Interestingly, a Supreme Court precedent complicates matters. In 2021, the court acquitted an individual who had transferred 1.4 billion won worth of mistakenly issued Bitcoin to another account. The ruling stated that cryptocurrencies do not qualify as “property” under the Criminal Act, differentiating them from traditional bank deposits.

“Existing precedent holds that cryptocurrency is not property in the sense required for embezzlement,” explained Han Sang-jun, a lawyer at Daegun. “While unjust enrichment can be pursued through civil litigation, criminal punishment may prove difficult.”

Some legal experts argue that breach of trust could still apply in this case. When someone receives another person’s assets without justification, it constitutes unjust enrichment. The principle of good faith imposes a duty to preserve the assets until they are returned. However, the Supreme Court previously declined to recognize breach of trust in cases involving mistaken Bitcoin transfers due to the inherent anonymity of cryptocurrencies.

The Road Ahead

As Bithumb navigates this unprecedented situation, the legal landscape remains murky. While recovery through civil litigation seems plausible, the potential for criminal charges adds another layer of complexity. Legal experts are divided on the implications of the case, particularly given the evolving recognition of cryptocurrency as a form of property.

As Bithumb continues its efforts to reclaim the mistakenly issued Bitcoin, the outcome of this saga could set significant legal precedents for the cryptocurrency industry in South Korea and beyond. The question remains: will justice prevail, or will the windfall remain a tantalizing mystery for those who stumbled upon it?

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.

BY JEONG JIN-HO, KIM DA-YOUNG