South Korean Prosecutors Probe Disappearance of Seized Bitcoin From Government Custody
The Gwangju District Prosecutors’ Office is investigating the disappearance of Bitcoin that had been seized and held under government custody, raising concerns over how public agencies manage digital assets.
According to internal reviews and media reports, multiple Bitcoin holdings went missing in mid-2025 during the storage and management process. Preliminary findings suggest the loss resulted from a phishing incident, rather than a direct breach of government systems.
How the Bitcoin was lost
Investigators believe that private key credentials were stored on a portable USB device. During a routine inspection, an employee reportedly accessed a fraudulent website, which exposed the stored credentials to third parties. Once the private keys were compromised, the Bitcoin was transferred irreversibly, leaving no technical means of recovery.
Authorities have not officially confirmed the exact amount of Bitcoin involved. However, local media and internal sources estimate the value at tens of billions of won, potentially equivalent to $48–49 million at current market prices.
Ongoing investigation
The Gwangju District Prosecutors’ Office confirmed that an internal investigation is underway but declined to disclose further details, citing the ongoing nature of the probe. Officials have not commented on possible disciplinary actions or whether custody procedures have been revised following the incident.
Legal backdrop and broader implications
The case comes as South Korea continues to expand its legal framework for digital assets. On Jan. 8, 2026, the Supreme Court of South Korea ruled that Bitcoin held on centralized exchanges such as Upbit and Bithumb qualifies as seizable property under the Criminal Procedure Act.
That ruling built on earlier decisions in 2018 and 2021, which recognized cryptocurrency as intangible property with economic value, strengthening the state’s authority to confiscate digital assets in criminal investigations.
Custody challenges for public institutions
The incident has renewed scrutiny of government preparedness to manage cryptocurrency securely. Industry standards emphasize strict operational security, specialized key management systems, and isolation from everyday computing environments—measures that are often difficult to implement within traditional public-sector workflows.
As South Korea continues to formalize cryptocurrency enforcement and asset seizure procedures, the case underscores the operational risks involved when digital property is handled without dedicated custody infrastructure.
