TL;DR:
- South Korea will urgently review its custody protocols for confiscated cryptocurrencies after the National Tax Service leaked a wallet recovery phrase.
- The tax agency’s error led to the movement of around 4 million PRTG tokens, with a theoretical value of $4.8 million but very limited liquidity.
- In a separate incident, 22 BTC went missing from a police station in Gangnam.
South Korea is facing a confidence crisis in state management of digital assets. Finance Minister and Deputy Prime Minister Koo Yun-cheol announced that the government would conduct an urgent review of custody protocols for cryptocurrencies seized from tax delinquents, after the National Tax Service accidentally published the recovery phrase of a confiscated wallet.
Koo stated that the government will work alongside the Financial Services Commission and the Financial Supervisory Service to inspect the status and management of digital assets held by public institutions. The official also anticipated that authorities would “promptly establish and implement measures to prevent recurrence, including strengthening security in digital asset management.” No specific measures or timelines for the inspections were provided.
South Korea Fails Spectacularly at Digital Asset Custody
An NTS press release inadvertently exposed the recovery phrase of a seized wallet. According to the Korea JoongAng Daily, onchain data revealed that approximately 4 million PRTG tokens were transferred shortly after the publication. Although the theoretical value of those assets is around $4.8 million, the token’s real liquidity is very limited.
The Cyber Terror Response Division of the National Police Agency reported receiving a statement on Saturday from a person who claimed to have accessed the funds after seeing the exposed phrase and returned the assets the following day. Authorities plan to verify that account. In parallel, investigators are looking into whether the assets were fully restored.
Crimes or Incompetence?
This episode compounds a pattern of failures in state crypto custody chains. Since January, prosecutors and police have reported losses and draining of seized coins, including 22 BTC that went missing from a vault at the Gangnam police station and losses recorded at a district prosecutor’s office, triggering a series of national audits on cryptocurrency holdings in state custody.
