South Korea Orders Crypto Custody Investigation After Seed Phrase Leak

South Korea has initiated a cross-agency investigation into how public institutions manage seized digital assets after a serious operational failure exposed weaknesses in crypto custody practices. The review was ordered by Deputy Prime Minister Koo Yun-cheol following an incident involving the National Tax Service (NTS).

Authorities confirmed that an official press release mistakenly included a photograph of a hardware wallet displaying its full recovery seed phrase. The wallet contained approximately 4 million Pre-Retogeum (PRTG) tokens, valued at nearly 6 billion won, or about $4.8 million. Shortly after publication, the funds were drained by unknown parties.

Digital Asset Oversight Review Expands Across Agencies

The inspection will involve coordination with the Financial Services Commission and the Financial Supervisory Service. Officials will assess current safeguards, internal controls and custody procedures tied to confiscated cryptocurrencies.

This is not the first custody related setback. In a separate case, local authorities reportedly lost 22 Bitcoin seized during a 2021 cybercrime investigation after relying on a third-party custodian.

Strengthening South Korea Virtual Asset Security Framework

The government says the objective is to prevent similar breaches and reinforce national standards for digital asset management. As South Korea tightens its virtual asset oversight regime, the latest incident highlights the operational risks facing public institutions handling crypto assets in enforcement actions.

Disclaimer

This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.