South Korea orders cross-agency probe after repeated crypto custody failures

South Korea’s Deputy Prime Minister and Minister of Economy and Finance, Koo Yun-cheol, has announced a cross-agency sweep of how the government and public institutions handle seized digital assets after the National Tax Service (NTS) accidentally leaked a wallet seed phrase in a press release photo on Thursday.

On Thursday, officials published an image of a hardware wallet showing the full recovery phrase. The authorities lost roughly 4 million Pre-Retogeum (PRTG) tokens worth about 6 billion won (around $4.8 million) from a confiscated wallet as a result.

In a post on X, Yun-cheol said that the government, alongside the Financial Services Commission and Financial Supervisory Service, would review the status and management of all digital assets seized from delinquent taxpayers and “promptly” strengthen security controls.

South Korean authorities to launch cross-agency probe. Source: Yuncheol Koo

He also stressed that the state does not hold crypto beyond assets acquired through law enforcement actions.

National Tax Service leak exposes Korea’s seized asset safeguards

The announcement follows the incident on Thursday in which the NTS embedded the full mnemonic recovery phrase for a seized hardware wallet in an official press release photo celebrating a tax evasion crackdown, effectively handing control of the wallet to anyone who viewed the image. The blunder allowed unknown actors to drain the 4 million PRTG tokens within hours.

The NTS’s error was not an isolated lapse. South Korean authorities have also faced scrutiny over a separate custody failure in which Seoul’s Gangnam police allegedly lost 22 BTC seized in a 2021 hacking case after leaving the funds with a third-party custodian.

The government’s inspection is intended to “prevent recurrence” of such incidents that have exposed broader weaknesses in South Korea’s public sector digital asset controls, as officials move to tighten the country’s virtual asset oversight framework.

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