South Korean cryptocurrency exchange Bithumb said on Saturday it had accidentally given away more than $40 billion worth of bitcoins to customers as promotional rewards, triggering a sharp selloff on the exchange.

Bithumb apologised for the mistake, which took place on Friday, and said it had recovered 99.7% of the 620,000 bitcoins, worth about $44 billion at current prices. It had restricted trading and withdrawals for the 695 affected customers within 35 minutes of the erroneous distribution on Friday.

The exchange had planned to distribute small cash rewards of 2,000 Korean won ($1.40) or more to each user as part of a promotional event, but winners received at least 2,000 bitcoins each instead, media reports said.

"We would like to make it clear that this incident is unrelated to external hacking or security breaches, and there are no problems with system security or customer asset management," Bithumb said in a statement.

Read: Bitcoin plunges below $70,000 as slide continues

But South Korea's financial regulators, including the Financial Services Commission, said the incident "has exposed the vulnerabilities and risks of virtual assets".

After an emergency meeting, the regulators said in a statement they would launch an on-site inspection of Bithumb and other crypto exchanges if irregularities are found during reviews of their internal control systems, as well as their holdings and operations of virtual assets.

Bitcoin prices briefly slumped 17% to 81.1 million won on Friday evening on Bithumb, charts from the exchange show. It later recovered and last traded at 104.5 million won.

Bithumb trails Upbit, a dominant player in the South Korean crypto space.