South Korea Tax Agency Accidentally Exposes Crypto Recovery Phrase

A leaked wallet recovery phrase led to a $4.8M token transfer, raising concerns over South Korea’s crypto custody controls.

South Korea’s National Tax Service (NTS) is facing criticism after a major security lapse involving seized digital assets. A public press release photo revealed a cryptocurrency wallet’s recovery phrase, allowing anyone to access its funds. Soon after publication, tokens worth about $4.8 million were moved in a suspected breach. 

Tax Seizure Photo Leak Leads to $4.8M Crypto Wallet Breach

NTS released materials detailing on-site seizures targeting 124 high-value and habitual tax delinquents. Authorities said they confiscated assets worth 8.1 billion won, or about $5.6 million. Among the seized items were four USB devices containing digital assets from an individual identified as “Mr. C.”

A press photo included a Ledger cold wallet placed beside a sheet of paper. Printed on that sheet was a mnemonic recovery phrase. The phrase was clearly visible, and anyone with that phrase could restore and control wallet funds.

On-chain data from Etherscan shows that someone first deposited a small amount of ETH into the wallet. Funds were then moved in three transactions, transferring four million PRTG tokens. These tokens were removed shortly after the image became public.

Market Experts Warn of Custody Risks After Wallet Exposure

Following the incident, market experts strongly criticized what happened. Professor Hwang Seok-jin said publishing the recovery phrase was like posting a bank password online. He warned that mistakes like this reduce public trust and make it harder for authorities to recover seized assets.

Professor Cho Jae-woo added that the government lost a key chance to return the money to the national treasury. However, selling the stolen tokens may not be easy. PRTG has very low trading activity, with only $299 in daily volume.

The asset is listed on just one exchange, MEXC. Although its market value is about $12 million, the 4 million tokens moved are roughly 40% of the total supply. Selling such a large amount could push the price down sharply, making it hard to convert into cash.

Concerns are now growing over how South Korean authorities handle seized crypto assets. Recent cases show repeated weaknesses in custody and security practices.

In January, prosecutors in Gwangju investigated missing Bitcoin seized in a phishing attack involving recovery phrases. Earlier in February, police in Seoul’s Gangnam district said 22 BTC stored in a cold wallet since 2021 had been drained. That case resulted in arrests and internal investigations.

As government agencies seize more digital assets, pressure is rising to improve security. Publishing a wallet’s recovery phrase shows serious weaknesses in handling sensitive information. Authorities may now need stricter internal checks to prevent similar losses in the future.

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