South Korean Prosecutors Investigate Disappearance of Seized Bitcoin After Internal Custody Failure
- South Korea probes seized Bitcoin after a phishing error exposed wallet keys during a routine custody inspection.
- Loss estimates range from 70 to 100 billion won while officials investigate custody failures and recovery options.
- The Supreme Court ruling expands crypto seizure powers increasing pressure on agencies to secure digital asset custody.
South Korean prosecutors are investigating the disappearance of seized Bitcoin after an internal custody failure exposed wallet credentials. The case surfaced during a routine inspection at the Gwangju District Prosecutors’ Office. Depending on the price of Bitcoin, local media estimate the losses at 70 billion to 100 billion won. Law enforcement thinks a loss happened due to a phishing attack, and not a direct breach of the system.
The event has added pressure to the ways through which the law enforcement agencies handle digital assets. In addition, it arrives as South Korea increases its jurisdiction to confiscate cryptocurrency. Consequently, the case has become a reference point for operational risk in public crypto custody.
Bitcoin Disappears During Routine Custody Checks
Prosecutors detected the issue while reviewing access credentials for confiscated digital assets. These inspections occur regularly under internal control procedures. However, staff could no longer access the seized Bitcoin during the latest review. The discovery immediately triggered an internal probe.
Investigators traced the issue to human error during the inspection process. An employee reportedly accessed a fraudulent website while verifying wallet details. As a result, stored credentials became exposed to external actors. The compromised data allowed immediate asset transfers.
Officials reportedly stored private key passwords on a portable USB device. That device connected to a system used for routine checks. Once attackers obtained the keys, the Bitcoin moved permanently. Blockchain transfers do not allow reversals.
Loss Estimates Remain Unclear Amid Internal Probe
Authorities have not disclosed the exact amount of Bitcoin involved. However, reputable outlets cited internal estimates of nearly 70 billion won. Other sources placed potential losses above 100 billion won. Price volatility during the period explains the valuation gap.
The Gwangju District Prosecutors’ Office confirmed an ongoing internal investigation. However, officials declined to share custody details or valuation figures. They cited the sensitive nature of the probe. No public updates exist on disciplinary measures.
Investigators are also reviewing recovery options. However, technical limits restrict recovery once private keys leak. Therefore, full recovery appears unlikely. The probe remains active.
Legal Expansion Raises Pressure on Crypto Custody
The case occurred in the wake of a significant court decision by the Supreme Court on the seizure of cryptocurrencies. On Jan. 8, 2026, the court decided that Bitcoin held on centralized exchanges constitutes seizable property. The ruling supported previous decisions that have acknowledged crypto as intangible property.
The ruling stemmed from a money laundering case involving 55.6 Bitcoin. Lower courts approved the seizure from an exchange account. The Supreme Court upheld that decision. Consequently, authorities gained strong enforcement powers.
In the meantime, enforcement activity is still rising. Officials at customs recently dismantled a laundering network that laundered more than $100 million. Moreover, South Korea intends to revive corporate crypto investment, which was closed almost nine years ago. New rules may allow limited equity exposure. South Korea also plans to reopen crypto markets to listed firms with a 5% equity cap to manage early corporate risk. It recently created a legal path for blockchain securities within its regulated financial markets.
Together, these developments heighten operational demands on public agencies. Digital asset custody requires strict isolation and secure key management. Therefore, the Gwangju case highlights risks as enforcement expands.
