In a major security breach, the Gwangju District Prosecutors' Office in South Korea has lost approximately 40 billion won ($29 million) worth of seized Bitcoin. The loss, involving 320 BTC, occurred in August of the previous year during a routine work handover procedure. Prosecutors have launched an internal inspection targeting five investigators directly responsible for the assets' custody.
The official account states the loss resulted from an external phishing attack. Investigators allegedly accessed a fraudulent website that mimicked a legitimate internal system, compromising the login credentials to the digital wallet holding the seized Bitcoin. This led to the irreversible transfer of the funds. Authorities have firmly denied any internal collusion, attributing the incident solely to cyber-theft.
The case exposes critical vulnerabilities in institutional cryptocurrency custodianship. Experts point to the likely use of a 'hot wallet' (internet-connected) for high-value assets instead of offline 'cold storage,' and a lack of multi-signature security protocols. The theft represents one of the most significant losses of government-held cryptocurrency in recent years.
The incident has broader implications, eroding public trust in the state's ability to manage digital assets and potentially compromising legal cases where the Bitcoin was evidence. It is expected to force a nationwide review of digital asset handling protocols across South Korean government agencies.
In a related development, blockchain analytics firm TRM Labs highlighted ongoing security challenges, including a separate sophisticated theft network potentially linked to U.S. government seizure funds. Furthermore, the firm noted the resurgence of crypto-based fundraising by extremist groups like ISIS, which often utilizes stablecoins such as Tether (USDT) to finance operations, demonstrating the dual-use nature of cryptocurrency technology for both innovation and illicit activity.
