Bithumb and Upbit to Compensate Users $2.4 Million for Downtime

South Korean crypto exchanges Upbit and Bithumb have agreed to compensate users affected by system failures during the unexpected martial law declaration back in December.

Notably, the compensation, totaling over 3.5 billion won (approximately $2.5 million), will become one of the largest payouts in the country’s crypto history.

According to reports submitted to South Korea’s National Assembly, Upbit will pay 3.14 billion won to 596 affected users, while Bithumb will allocate 377 million won to 124 users.

However, negotiations between the exchanges and users are still ongoing and are in their final stages, with the possibility of a slight increase in the concluded payout amount.

Upbit Technical Failures Amid Traffic Surge

On December 3, President Yoon Seok-yeol, briefly declared martial law citing the need to protect South Korea from alleged threats by pro-North Korean forces.

The sudden declaration of martial law however caused a massive surge in user activity on exchanges, quickly overwhelming their systems. According to reports, Upbit’s concurrent users skyrocketed from 100,000 to over 1.1 million, while Bithumb’s user count exceeded 500,000. They both experienced a 99-minute and 62-minute disruption respectively.

Consequently, during this downtime, users were faced with trading and withdrawal restrictions, with significant losses as Bitcoin’s price dropped from 130 million won to 88 million won. This in turn caused many users to incur losses on their investments.

Financial Authorities Scrutinize Compliance and Upgrades

In response to these failures, South Korea’s financial authorities announced that they have resumed on-site inspections of crypto exchanges. The Financial Supervisory Service (FSS) is closely monitoring how exchanges implement promised improvements, including server upgrades, cloud transitions, and enhanced business contingency plans (BCP).

“We are checking whether exchanges are properly following their implementation plans, such as increasing servers and improving internal processes,” a Financial Supervisory Service official said. Authorities are also investigating whether compensation standards are being applied fairly and consistently.

Challenges with Investor Protection Measures

While the compensation effort for affected users has been significant, lawmakers and many others have raised concerns about the lack of a robust institutional framework for investor protection.

Rep. Kim Hyun-Jung of the National Assembly’s Political Affairs Committee called for more concrete measures, such as increased server capacity and better emergency response systems, to prevent future failures.

“Although the number of virtual asset investors is growing rapidly, the institutional foundation for investor protection remains insufficient,” Kim said.