South Korea’s tax authorities lost $4.8 million worth of seized cryptocurrency after photos showing the associated wallet’s mnemonic phrase were included in a report on the February 26 incident.
The cryptocurrency comes right after the National Tax Service (NTS) shared a photo containing a hardware wallet and its secret phrase. The service apologized for the incident, Asian Business reported on Sunday.
“In an effort to provide more graphic information, we carelessly provided the original photos without realizing they contained sensitive information,” the tax office said. “This is entirely the fault of the National Tax Service (NTS) and there is no excuse.”
This is at least the second time something like this has happened in the country. South Korean authorities are facing scrutiny over another failure in which police in Gangnam, Seoul, allegedly lost 22 BTC (approximately $1.5 million) after handing over funds and mnemonic phrases to a third-party custodian in a 2021 hacking case. The perpetrator of the theft was recently detained.
The new case involves a taxpayer who owed NTS capital gains tax, which resulted in the person’s home being raided. Authorities took control of at least four hardware wallets and cash. They then photographed the seized items, which contained at least two mnemonics, and shared the clear photo publicly.
NTS requested police intervention to recover the stolen cryptocurrency. The tax authority also revealed plans to conduct an external review of its overall security system and overhaul its entire process manual, from seizure to sale of virtual assets.
South Korea’s Deputy Prime Minister and Minister of Finance and Economy Koo Yoon-cheol confirmed the leak in an X post on Sunday.
Koo said multiple government agencies, including the Financial Services Commission and the Financial Regulatory Authority, will investigate the leak. He also said they would review how government agencies and public institutions seize and manage digital assets to prevent a recurrence.
