South Korean police have launched an investigation into the alleged theft of cryptocurrency worth about $4.8 million that had been seized by the National Tax Service (NTS), after sensitive wallet information was inadvertently disclosed, the Korea JoongAng Daily reported.
The National Police Agency (NPA) said the case has been assigned to its cyberterrorism response division, which has begun a preliminary inquiry into the incident.
Authorities started analyzing the flow of the digital assets and tracking potential suspects after receiving a formal investigation request from the NTS on Feb. 27, according to the report.
The incident stems from a press release issued by the tax agency on Thursday to highlight its efforts to collect delinquent taxes.
The material mistakenly exposed a mnemonic recovery phrase — a master key used to restore access to a cryptocurrency cold wallet.
The digital assets held in the wallet were transferred out shortly after the information became public, the Korea JoongAng Daily said.
A cold wallet is a physical device used to store cryptocurrencies offline for security purposes.
However, possession of the mnemonic phrase allows a user to recreate the wallet on another device and transfer the assets without needing the original hardware, making the recovery code highly sensitive.
Investigators are examining whether the information was compromised through high-resolution images distributed to certain media outlets, which may have allowed the recovery phrase to be read and exploited, the report said.
If a suspect is identified, possible charges could include violations of South Korea’s information protection laws as well as computer fraud under statutes covering aggravated economic crimes, according to the Korea JoongAng Daily.
The case adds to a series of incidents involving the loss or mismanagement of confiscated digital assets by South Korean authorities.
Last month, the Gwangju District Prosecutors’ Office reportedly lost a significant amount of bitcoin that had been held as seized evidence.
Separately, a police station in Seoul’s Gangnam district faced scrutiny after discovering that bitcoins voluntarily submitted in connection with a criminal case had been leaked.
The incident highlights operational risks faced by government agencies as cryptocurrency seizures become more common in tax enforcement and criminal investigations.
While cold wallets are considered a secure storage method, the breach underscores that human error and information handling practices, rather than technology itself, remain a key vulnerability.