South Korean tax authorities lost $4.8 million in seized crypto after showing the relevant wallets’ seed sentences in a photograph covering the February 26 event.
The crypto was taken immediately after the National Tax Service (NTS) shared an image containing hardware wallets and their passphrases. The service apologized for the incident, Asia Business Daily reported on Sunday.
“In an effort to provide more vivid information, we were unaware that sensitive information was included and carelessly provided the original image,” the tax office said. “This is entirely the fault of the National Tax Service (NTS) without any apology.”
It is at least the second time something like this has happened in the country. South Korean authorities faced scrutiny over a separate fiasco in which Seoul’s Gangnam police allegedly lost 22 BTC (roughly $1.5 million) in a 2021 hacking case after handing over the funds and seed set to a third-party custodian. The authors of that theft were recently detained.
The new case involves a taxpayer who owed NTS capital gains tax, which led to the individual’s home being searched. Authorities took control of at least four hardware wallets and cash. They then photographed the seized items, which included at least two sets of seeds, and shared the unblurred image publicly.
NTS requested police intervention to recover the stolen cryptocurrency. The tax authority also revealed plans to conduct an external review of its overall security system and to revise the entire manual for the process from seizure to sale of virtual assets.
Koo Yun-cheol, South Korea’s vice prime minister and finance and economy minister, confirmed the leak in an X post on Sunday.
Koo said several government agencies, including the Financial Services Commission and the Financial Supervisory Service, would investigate the leak. He also said they would examine how government agencies and public institutions seize and manage digital assets to prevent recurrence.
