South Korean authorities accidentally revealed the recovery phrase for a cryptocurrency wallet in a press release, leading to the theft of nearly $5 million in seized assets. The National Tax Service issued an apology and launched an investigation into the breach. This incident highlights ongoing challenges in securing digital currencies by law enforcement.
On an unspecified recent date, South Korean police announced the seizure of $5.6 million in cryptocurrency from 124 individuals accused of tax evasion. In their press release, officers included images of a Ledger cold wallet device accompanied by a handwritten note. The note clearly displayed the full mnemonic recovery phrase, enabling unauthorized access to the funds without needing a PIN or further permissions.
The release was quickly retracted after the error was noticed, but screenshots had already spread via local media and tech sites like Bleeping Computer. Blockchain expert Cho Jae-woo informed a South Korean news outlet that the wallet held 4 million PRTG tokens, valued at about $4.8 million, at the time of the theft. On-chain data from Etherscan showed the thief first depositing a small amount of ETH for transaction fees, then moving the tokens out in three separate transfers.
In a follow-up statement on Sunday, the National Tax Service expressed deep regret, explaining that the images were added for visual appeal but the recovery phrase was overlooked and not redacted. Officials admitted there was no justification for the mistake and confirmed cooperation with national police to track the transfers and recover the assets. No suspects have been identified, as the information circulated widely online.
Cho Jae-woo criticized the oversight, comparing it to leaving a physical wallet unlocked and noting that the original owner had properly secured the phrase on paper only. He estimated the loss at billions of won for the national treasury. This blunder follows prior incidents, including a January loss of seized bitcoin in Gwangju possibly due to a phishing attack on Coinbase, and last month's disappearance of 22 bitcoins from a cold wallet in Seoul's Gangnam district without the device being removed.
The National Tax Service stated it is now enhancing internal protocols and staff training to avoid similar leaks in handling cryptocurrency seizures.
