South Korean prosecutors have successfully recovered approximately $21.4 million worth of Bitcoin (BTC) that had been stolen from a government-controlled evidence wallet, according to multiple local media reports.
The case has sparked nationwide concern over digital asset custody practices within law enforcement agencies and triggered broader internal reviews across the country.
How the Breach Happened
In December last year, the Gwangju District Prosecutors’ Office discovered that a large amount of confiscated Bitcoin had gone missing from its evidence storage system. The BTC had originally been seized during a raid on an illegal online gambling platform.
An internal investigation later revealed that the theft occurred months earlier — in August — when investigators unintentionally accessed a phishing website. During the incident, officials reportedly entered a wallet recovery phrase (seed phrase), unknowingly granting hackers full access to the digital assets stored in the wallet.
The compromised funds totaled 320.8 BTC, valued at around $21.4 million at the time of recovery.
Hacker Returns 320.8 BTC
In a surprising turn of events, the hacker voluntarily returned the stolen Bitcoin earlier this week. According to local outlet Digital Asset, the full 320.8 BTC was transferred back to a wallet controlled by authorities on Tuesday.
Prosecutors stated that they had coordinated with centralized cryptocurrency exchanges to block transactions linked to the hacker’s wallet address. These measures reportedly made it increasingly difficult for the perpetrator to convert or liquidate the stolen Bitcoin.
As of now, the hacker’s identity remains unknown.
Following the recovery, authorities transferred the returned BTC to a domestic cryptocurrency exchange for enhanced security custody while continuing efforts to trace the individual responsible for the breach.
Nationwide Review of Seized Crypto Management
The incident has prompted a nationwide audit of digital asset management procedures within South Korean investigative agencies.
Last week, inspection results revealed that the Gangnam Police Station in Seoul had also lost track of 22 BTC stored in cold wallets since 2021. Meanwhile, the Gyeonggi Bukbu Provincial Police Agency confirmed that it has launched an internal probe to determine whether insider involvement may have contributed to the earlier breach.
The case underscores growing concerns over operational security standards in the handling of seized digital assets, particularly as cryptocurrencies become increasingly integrated into criminal investigations.
Bigger Questions for Crypto Custody
This event highlights a crucial issue for institutions worldwide: even government agencies are not immune to phishing attacks and operational security failures.
While the return of the 320.8 BTC may be viewed as a positive outcome, the case raises several pressing questions:
Are law enforcement agencies sufficiently trained in crypto security?
Should seized digital assets be held in multi-signature custody?
Is third-party institutional custody a safer alternative?
Could similar vulnerabilities exist in other jurisdictions?
With Bitcoin trading at elevated levels and governments increasingly seizing crypto assets in criminal cases, robust custody infrastructure has never been more critical.
What Do You Think?
Do you believe authorities should rely on centralized exchanges for custody?
Or should governments build their own secure cold storage systems?
Drop your thoughts in the comments 👇
Let’s discuss.
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Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own research before making any financial decisions. We are not responsible for any investment actions taken based on this content.
