Cross-agency investigation launched in South Korea following multiple cryptocurrency custody mishaps
Following the National Tax Service's accidental disclosure of a seed phrase in an official press statement, Deputy Prime Minister Koo Yun-cheol has mandated a comprehensive inter-agency examination of confiscated cryptocurrency wallets.
Koo Yun-cheol, who serves as South Korea's Deputy Prime Minister and Minister of Economy and Finance, has directed a comprehensive cross-agency examination of digital asset handling procedures across government and public institutions. This directive comes in the wake of Thursday's incident where the National Tax Service (NTS) inadvertently exposed a wallet seed phrase through a photograph included in an official press release.
The image released by officials on Thursday displayed a hardware wallet with its complete recovery phrase visible. This security breach resulted in the theft of approximately 4 million Pre-Retogeum (PRTG) tokens, valued at roughly 6 billion won (approximately $4.8 million), from a wallet that had been confiscated by authorities.
Through a statement posted on X, Yun-cheol announced that the government, working in coordination with the Financial Services Commission and Financial Supervisory Service, would conduct a thorough examination of the status and management protocols for all digital assets confiscated from taxpayers who failed to meet their obligations, with plans to "promptly" enhance security measures.
Additionally, he emphasized that the government maintains no cryptocurrency holdings except for those obtained through enforcement activities related to law.
National Tax Service leak exposes Korea's seized asset safeguards
This declaration comes after Thursday's incident where the NTS included the complete mnemonic recovery phrase for a confiscated hardware wallet within an official press release photograph that was meant to showcase a tax evasion crackdown success, essentially providing wallet access to any individual who saw the image. This mistake enabled unidentified parties to withdraw the 4 million PRTG tokens in a matter of hours.
This error by the NTS represents more than just a single incident. South Korean officials have also come under fire for another custody mishap involving Seoul's Gangnam police, who reportedly lost 22 BTC that had been seized during a 2021 hacking investigation after entrusting the cryptocurrency to a third-party custodian.
The governmental review has been designed to "prevent recurrence" of these types of incidents that have revealed more extensive vulnerabilities in South Korea's public sector management of digital assets, as authorities work to strengthen the nation's regulatory framework for virtual asset oversight.