|
Getting your Trinity Audio player ready...
|
- A government press release error exposed a wallet seed phrase, enabling a $4.8M token drain.
- Separate custody failures suggest broader weaknesses in public-sector crypto handling.
- Pressure is rising for standardized security frameworks and oversight.
A costly operational mistake by South Korea’s tax authority has exposed fresh weaknesses in how public institutions handle digital assets. The country’s National Tax Service accidentally published a crypto wallet seed phrase in an official press release, allowing unknown actors to drain millions in tokens and prompting renewed scrutiny of government crypto safeguards.
Seed Phrase Exposure Leads to Immediate Token Drain
The incident occurred when the National Tax Service released materials tied to its enforcement campaign against tax delinquents. One image reportedly showed a hardware wallet from Ledger alongside a sheet displaying the full recovery phrase without masking.
Blockchain analysts later traced the compromised wallet, which briefly received 4 million PRTG tokens — valued at roughly $4.8 million — before the entire balance was transferred out in a single transaction. The speed and precision of the transfer strongly suggest that opportunistic observers quickly exploited the leak once the press release became public.
Researchers, including experts from Hansung University, confirmed the movement of funds. While the stolen tokens may prove difficult to liquidate, the breach itself highlights serious procedural risks in how authorities document and present seized digital assets.
Second Custody Incident Intensifies Pressure on Authorities
The seed phrase leak comes amid another crypto custody controversy in the country. Earlier this month, police discovered that 22 Bitcoin seized during a 2021 investigation had disappeared from a cold wallet stored in a vault in Gangnam. Investigators later concluded the coins were moved using a mnemonic phrase that police had never fully controlled.
Together, the two incidents point to systemic weaknesses in how digital evidence and seized assets are stored, documented, and audited.
Industry Errors Add to Regulatory Scrutiny
At the same time, regulators are dealing with fallout from a major exchange error involving Bithumb. The platform mistakenly credited users with massive phantom Bitcoin balances due to a system fault, prompting extended oversight from the Financial Services Commission.
These overlapping failures — spanning government agencies, law enforcement, and private exchanges — are accelerating calls for standardized custody frameworks and stronger internal controls across the country’s crypto ecosystem.
Also Read: South Korea’s $1T Pension Fund Loses Billions on Crypto Stocks — What Happens Next?
While officials say the financial damage from the leak may be limited, the reputational impact could be far greater. As South Korea positions itself as a regulated crypto hub, experts argue that consistent custody standards, secure documentation practices, and specialized training for public agencies will be critical.
If reforms follow, this costly mistake could ultimately drive more resilient infrastructure for handling digital assets across the country.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
I’m your translator between the financial Old World and the new frontier of crypto. After a career demystifying economics and markets, I enjoy elucidating crypto – from investment risks to earth-shaking potential. Let’s explore!
