Seized Bitcoin Vanishes as South Korea Expands Crypto Control
- Prosecutors found seized Bitcoin was missing after last year’s audit in custody.
- Investigators link the loss to phishing tied to the exposed wallet access control.
- The case emerges as courts confirm broader powers to seize digital assets nationwide.
South Korean prosecutors are investigating the disappearance of Bitcoin seized as criminal proceeds after an internal audit flagged missing assets under state custody. Authorities estimate the loss at approximately 70 billion won, or $48 million. A senior prosecution source told local media that the Bitcoin likely vanished during management last year.
Investigators now treat the case as a suspected phishing attack involving compromised storage controls. The incident emerged as South Korea expands legal authority over crypto markets. The case also arrived during intensified regulatory activity around digital assets and enforcement standards.
Audit Findings and Suspected Phishing Attack
Yonhap News reported Thursday that the Gwangju District Prosecutors’ Office confirmed the missing Bitcoin during a recent internal review. The assets came from a prior criminal case and no longer appear in official records.
Prosecutors believe the loss occurred in the middle of last year while officials stored and managed the Bitcoin. Investigators suspect phishing, though they declined to disclose exact amounts or current valuations during the ongoing probe.
Early evidence indicates that officials stored the Bitcoin on a portable USB device with a durable custody system. Reports also state that a wallet password reached a third party during a routine inspection, enabling unauthorized transfers.
Legal Context and Prior Precedents
The case surfaced shortly after a Supreme Court ruling reported on January 9 confirmed that Bitcoin held on exchanges can be seized under the Criminal Procedure Act. The ruling involved 55.6 BTC seized from a money laundering suspect.
That December decision reinforced earlier judgments that classify cryptocurrencies as intangible assets with economic value. A 2018 ruling first established that courts could seize crypto linked to criminal activity.
Later decisions expanded seizure authority further. Courts also confirmed that Bitcoin on domestic exchanges like Upbit and Bithumb qualifies for confiscation during criminal proceedings.
Broader Security Concerns and Industry Data
This marks the second major Bitcoin controversy tied to Gwangju authorities. In November 2021, 1,476 BTC disappeared during a police seizure from an illegal gambling site, with litigation still pending before the Supreme Court.
The present case differs from previous cases in that it does not involve police officers but instead involves their role as prosecutors. The case raises security concerns about two elements, which include internal controls and human vulnerabilities, but does not address blockchain system weaknesses and how secure are seized digital assets under state custody?
The data shows that worldwide patterns exhibit identical characteristics. PeckShield reported that scam and phishing activities resulted in $1.37 billion of losses during 2025, representing a 64% increase from the previous year.
Related: South Korea To Lift 9-Year Ban On Corporate Crypto Access
Ledger announced a customer data breach that occurred because of a third-party payment processor. Over 16 million South Koreans now hold crypto accounts, representing approximately one-third of the population, as regulators increase their oversight of the digital currency market. The case involves missing seized Bitcoin, which disappeared during state custody because of phishing attacks and inadequate internal security procedures. The situation establishes security risks that arise from the current methods authorities use to store and protect digital assets from confiscation. The situation creates trust problems, with accountability challenges for society, because governments create new rules to control and monitor digital currency activities. The incident shows that human mistakes pose a greater security risk to institutional cryptocurrency operations than actual blockchain technology weaknesses.
