South Korean tax authorities lost $4.8 million in seized crypto after displaying the seed phrases of affected wallets in a photograph covering the February 26 event.
The crypto was caught immediately after the National Tax Service (NTS) shared a photo containing hardware wallets and their passphrases. The department apologized for the incident, Asia Business Daily reported on Sunday.
“In an effort to provide more vivid information, we did not realize that sensitive information was included and carelessly provided the original photo,” the tax office said. “It is entirely the fault of the National Tax Service (NTS), without any excuse.”
This is at least the second time such a thing has happened in the country. South Korean authorities have come under scrutiny following another failure in which police in Seoul’s Gangnam allegedly lost 22 BTC (about $1.5 million) in a 2021 hacking case after leaving the funds and seed phrase with a third-party custodian. The perpetrators of this theft were recently arrested.
The new case involves a taxpayer who was required to pay NTS capital gains tax, which led to a search of the individual’s home. Authorities took control of at least four hardware and cash wallets. They then photographed the seized items, which included at least two key phrases, and shared the unblurred photo publicly.
The NTS requested police intervention to recover the stolen cryptocurrency. The tax authority also revealed its intention to conduct an external review of its overall security system and revise the entire manual of the process from seizure to sale of virtual assets.
Koo Yun-cheol, South Korea’s deputy prime minister and minister of finance and economy, confirmed the leak in a 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 review how government agencies and public institutions seize and manage digital assets to prevent this from happening again.
