Police in Seoul, South Korea, are facing scrutiny after losing access to 22 Bitcoin, valued at approximately $1.4 million at current market prices. This incident stems from the Gangnam Police Station’s failure to adhere to established cryptocurrency custody guidelines. Instead of securely storing the confiscated Bitcoin in their own cold wallets, officers delegated management to a third-party service.
The Bitcoin was originally seized from a company that had fallen victim to a hacking incident in 2021. According to local media outlet Dong-A Ilbo, the police were required to store the digital assets in a secure offline wallet under their control. However, they allowed the funds to remain in a wallet managed by a third party, and notably did not hold the seed phrase necessary for accessing the assets. This lapse in protocol has raised serious concerns regarding the handling of cryptocurrency by law enforcement.
The situation took a turn in 2022 when the police lost control of the Bitcoin. The third-party firm that was managing the wallet had borrowed Bitcoin from an individual named “Jeong,” who was also given access to the wallet’s secret phrase. It wasn’t until this year that the missing funds were identified during a review conducted by the Gwangju District Prosecutors’ Office, which uncovered a separate case involving 320 Bitcoin—worth around $21 million—that had also gone missing.
In response to the discovery of the lost Bitcoin from the Gangnam Police Station, the Gyeonggi Northern Provincial Police Agency has arrested two individuals as part of an ongoing investigation. A police spokesperson indicated that efforts are currently focused on understanding the circumstances surrounding the Bitcoin’s disappearance. Previous findings reveal that a member of the hacking investigation team had been indicted on bribery charges, with allegations that the third-party firm offered bribes to influence the investigation in their favor.
This incident unfolds amidst heightened scrutiny on South Korean financial regulators, particularly after an egregious error by the crypto exchange Bithumb led to $43 billion in erroneous Bitcoin distributions earlier this month. Instead of the intended promotional distribution of 2,000 South Korean won (approximately $1.40) to users, the exchange inadvertently sent out a staggering 2,000 Bitcoin, equating to around $135 million, causing widespread concern over regulatory oversight in the cryptocurrency sector.
