South Korean prosecutors are investigating the disappearance of Bitcoin that had been seized and held in government custody, in what officials say appears to have been the result of a phishing attack rather than a systemic breach of state systems. What happened - The Gwangju District Prosecutors’ Office says multiple bitcoins vanished during the office’s storage and management process. Internal reviews place the incident in mid-2025. - Preliminary findings indicate the loss stemmed from a phishing incident. According to the probe, private key passwords were stored on a portable USB device. During a routine check, an employee reportedly visited a fraudulent website, exposing those credentials to third parties. - Once private keys were compromised, the Bitcoin was moved and could not be recovered because blockchain transfers are irreversible. Scale and official response - Prosecutors have confirmed an internal investigation is underway but have not released exact figures or operational details while the probe continues. - Local media and internal sources estimate the value of the missing Bitcoin at tens of billions of won — roughly $48–49 million — though authorities have not verified that figure publicly. - No information has been released about disciplinary measures or changes to custody procedures to date. Legal and policy context - The case comes as South Korea tightens its legal stance on digital assets. On Jan. 8, 2026, the Supreme Court ruled that Bitcoin held on centralized exchanges such as Upbit and Bithumb is “seizable property” under the Criminal Procedure Act. That decision builds on earlier 2018 and 2021 rulings that treated cryptocurrency as intangible property with economic value, expanding the state’s authority to confiscate crypto in criminal cases. Why this matters - The incident raises serious questions about the technical preparedness of government agencies entrusted with digital assets. Industry best practices for cryptocurrency custody emphasize strict operational security: specialized key management, hardware-based storage (e.g., HSMs, hardware wallets), air-gapped environments, multi-signature controls, and robust staff training to prevent social-engineering attacks. - Beyond the immediate financial loss, the episode underlines gaps in procedure and governance as South Korea formalizes its approach to dealing with seized digital assets and crypto enforcement. What’s next - The Gwangju prosecutors’ investigation is ongoing. The outcome could prompt reforms to how public institutions store and manage seized cryptocurrencies, and may influence broader policy debates about custody standards and accountability for digital assets in South Korea. Read more AI-generated news on: undefined/news

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