How did Bithumb manage to recover 99.7% of the overpaid Bitcoin?

Bithumb Recovers 99.7% of Overpaid Bitcoin: How They Managed the Remaining Shortfall

In February 2025, South Korean crypto exchange Bithumb made headlines after accidentally overpaying thousands of BTC in user withdrawals-then successfully recovering 99.7% of the overpaid Bitcoin in a matter of days. In an industry where lost funds often stay lost, Bithumb’s response has become a case study in risk management, on-chain forensics, and user coordination.

This article breaks down what happened, how Bithumb recovered almost all of the funds, what they did about the remaining shortfall, and what this incident means for centralized exchanges, institutional users, and the broader crypto ecosystem.

What Actually Happened: The Bithumb Bitcoin Overpayment Incident

Bithumb’s issue stemmed from a technical glitch in its withdrawal processing system, which caused the platform to over-disburse BTC to multiple user addresses. Instead of sending the correct withdrawal amount, some transactions sent substantially more Bitcoin than intended.

Key elements of the event:

• Trigger: Internal system error in withdrawal settlement logic
• Asset impacted: Bitcoin (BTC) withdrawals
• Impact: Overpayment of BTC to a subset of user addresses
• Recovery: ~99.7% of overpaid BTC reclaimed
• Status as of 2025: Operations normalized; incident treated as a risk-management reference for CEXs

While the exact internal code-level cause hasn’t been fully disclosed, Bithumb described it as a settlement miscalculation affecting the final output amounts rather than a security breach or external hack.

Scale and Significance

Although the absolute amount of BTC involved was large in fiat terms, the incident is notable less for the loss and more for the speed and effectiveness of the recovery, which is unusually high for operational mishaps in crypto.

How Bithumb Recovered 99.7% of the Overpaid BTC

Recovering nearly all of the mistakenly sent Bitcoin required a multi-layered response. Bithumb combined on-chain analysis, user outreach, operational controls, and legal frameworks.

1. Immediate Response and Containment

Right after discovering the anomaly, Bithumb took emergency measures:

• Paused affected withdrawal channels to prevent further mis-sends
• Isolated impacted wallets and tagged them internally
• Launched an internal incident response team involving engineering, compliance, and legal

This quick containment ensured that no additional overpayments were made and that all impacted UTXOs could be tracked.

2. On-Chain Forensics and Address Mapping

Bitcoin’s transparent ledger played a crucial role in tracking the funds.

Bithumb:

1. Mapped all overpaid outputs to known exchange user accounts (KYC-linked where applicable).
2. Used transaction graph analysis to follow BTC flows, even if users moved funds:
• Exchange deposits to other platforms
• Self-custody wallets
• Mixing or consolidation attempts

3. Worked with external blockchain analytics providers to flag suspicious flows and tag addresses at risk of loss.

This made it much harder for overpaid funds to simply disappear into the broader network without trace.

3. User Coordination and Incentive-Based Returns

Most of the recovered Bitcoin came back from users who:

• Recognized the overpayment
• Were contacted by Bithumb and requested to return the excess BTC
• Understood that keeping the funds could lead to account sanctions or legal exposure

Bithumb reportedly used:

• Direct in-app notifications and email outreach
• Reminders that overpaid amounts are not legally the user’s property
• Incentive-aligned solutions, such as:
• Allowing users to return via a simple click-through flow on the platform
• Offering support for fee coverage on returns (or netting from future balances)

In practice, most users opted to comply-especially KYC’d users whose real-world identities are known.

What About the Remaining 0.3%? Managing the Shortfall

Recovering 99.7% is impressive, but in high-value BTC terms, the remaining 0.3% shortfall is still meaningful. Bithumb’s approach to that remainder highlights how serious exchanges must be about treasury management and user trust.

Internal Coverage and Treasury Management

For the unrecovered portion, Bithumb primarily relied on:

• Internal reserves and corporate treasury to absorb the loss
• Accounting treatment as an operational loss, not a user-facing deficit

Importantly:

• Customer balances were not haircut or socialized.
• No “bail-in” or user loss-sharing mechanism was applied.
• The loss was managed as a business risk, not passed through to retail customers.

Legal and Enforcement Options

While most of the overpaid BTC was returned voluntarily, a few cases likely involved:

• Users who refused to return funds
• Users who moved BTC rapidly through non-KYC channels

For those, Bithumb’s options included:

• Treating the funds as unjust enrichment or equivalent under Korean law
• Cooperating with other exchanges to:
• Freeze or flag incoming related funds
• Request KYC-linked account information where BTC was deposited
• Pursuing selective legal action against non-cooperative recipients, especially institutional or large-account holders

In practice, the cost-benefit analysis means not every satoshi will be chased indefinitely, but the legal framework serves as a deterrent for non-cooperation.

Risk Management Lessons for Centralized Crypto Exchanges

The Bithumb incident has turned into a reference point for operational risk and payment-rail design across centralized exchanges.

Key Technical and Operational Takeaways

1. Multi-layer Validation of Withdrawal Amounts

Exchanges are tightening:

• Double-check logic between user balances, order books, and withdrawal engines
• Pre-broadcast checks on unusual withdrawal sizes or patterns
• Threshold-based manual approvals for outsized or anomalous withdrawals

2. Real-Time Monitoring and Alerting

Better monitoring tools are now standard:

• Alerts for sudden spikes in total daily withdrawals
• Anomaly detection for per-address payment patterns
• Dashboards comparing intended vs actual disbursement at the transaction level

3. Separation of Duties and Signing Policies

More exchanges are:

• Requiring multi-signature or multi-approver workflows for high-value batches
• Segregating responsibilities between:
• Engineers who deploy code
• Operators who approve large withdrawals
• Risk/compliance teams who set thresholds

Table: Core Controls Inspired by the Bithumb Incident

Why This Matters for Crypto Traders, Builders, and Institutions

For retail users, the incident is a reminder that:

• Even major exchanges can experience operational errors, not just hacks.
• The safeguards and recovery procedures matter as much as headline “security” claims.

For institutions and web3 builders, Bithumb’s experience underscores:

• The importance of on-chain transparency to support resolution of errors.
• How KYC and AML frameworks can be used not just for regulation, but for asset recovery in edge cases.
• The growing expectation that centralized venues have bank-grade operational controls while still interacting with open, permissionless networks.

Conclusion: A Rare Recovery Win in an Error-Prone Industry

The Bithumb overpayment incident could have been another story of irretrievably lost crypto. Instead, the exchange managed to:

• Recover 99.7% of overpaid Bitcoin
• Absorb the remaining 0.3% shortfall via internal resources
• Preserve user balances and confidence
• Provide a template for incident response and on-chain recovery that other exchanges can study

For a crypto ecosystem that often focuses on exploits and rug pulls, this case highlights something different: when infrastructure, user coordination, and legal frameworks are aligned, even serious operational mistakes can be largely reversible.

As centralized exchanges continue to coexist with DeFi and web3-native rails, this incident will likely be cited as a benchmark for operational resilience in the next generation of crypto platforms.