Seized Bitcoin Vanishes From Police Control
Police officers from the Gangnam Police Station in Seoul lost access to 22 confiscated Bitcoin, now valued at roughly $1.4 million. The funds had originally been seized in 2021 from a company that suffered a hacking incident.
Instead of transferring the digital assets into a secure law enforcement-controlled cold wallet, officers reportedly allowed a third-party firm to retain custody. Critically, investigators did not maintain possession of the wallet’s seed phrase, effectively relinquishing control over the funds.
Failure to Follow National Guidelines
According to guidelines issued by the National Police Agency, confiscated virtual assets should be transferred to an agency-controlled hard wallet. The assets are then meant to be stored securely in a separate physical safe.
Those procedures were not followed in this case. By leaving the Bitcoin in an externally managed wallet, authorities exposed the funds to mismanagement and potential theft.
The Borrowed Bitcoin and Disappearance
The loss reportedly occurred in 2022 when the third-party firm borrowed Bitcoin from an individual identified in local reports as “Jeong.” That individual was given access to the wallet’s secret recovery phrase.
Because the police did not retain custody credentials, they were unable to intervene or prevent the transfer. The disappearance of the assets went unnoticed for an extended period.
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Discovery During Separate Audit
The missing Bitcoin was only uncovered after prosecutors conducted a review tied to a separate case involving 320 missing Bitcoin. That larger discrepancy triggered broader scrutiny of digital asset custody practices.
Investigators from the Gwangju District Prosecutors’ Office reportedly identified the lapse during a reassessment of seized crypto procedures. The delayed discovery raised further questions about oversight controls.
Arrests and Expanding Investigation
Two suspects have now been arrested by the Gyeonggi Northern Provincial Police Agency in connection with the missing Bitcoin. Authorities stated that investigations are ongoing to determine how the assets were “leaked out.”
Officials are examining the exact chain of custody and whether bribery influenced investigative decisions. A member of the original hacking investigation team was reportedly indicted on bribery charges last year.
Regulatory Pressure Mounts in South Korea
The incident comes amid broader scrutiny of South Korea’s crypto oversight framework. Earlier in the month, regulators faced criticism after failing to detect an internal system flaw at exchange Bithumb.
That separate incident involved an accidental distribution of billions of dollars’ worth of Bitcoin to users due to an internal technical error. The repeated lapses have intensified public and legislative pressure.
Lessons in Digital Asset Custody
Unlike physical cash or seized property, cryptocurrencies require strict key management protocols. Control over private keys determines ownership, making procedural discipline essential.
The Gangnam Police Station case highlights how traditional law enforcement processes may not yet be fully adapted to digital asset realities. As crypto adoption grows, custody failures may become more costly and more visible.
