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Photo courtesy of Yonhap News |
[Alpha Biz= Paul Lee] Questions are mounting after a significant amount of Bitcoin seized and stored by South Korean prosecutors was found to be missing, raising concerns over asset management failures within the prosecution service.
According to the Gwangju District Prosecutors’ Office on the 23rd, prosecutors discovered last December that a substantial portion of Bitcoin held as seized assets had disappeared during a routine verification process. Following an internal review, prosecutors stated that the loss “appears to have resulted from a phishing attack.”
The Bitcoin was reportedly stored in a physical hardware wallet resembling a USB device. As Bitcoin itself exists on a decentralized blockchain ledger, such wallets do not contain the cryptocurrency directly but instead store private keys that grant access to and control over the assets.
Based on the prosecutors’ explanation, it is suspected that the private key may have been compromised after the hardware wallet was connected to a computer that accessed a phishing website. Given that seized assets are periodically checked, one possibility is that prosecutors inadvertently accessed a malicious site while attempting to verify the Bitcoin holdings.
While it is technically possible for malware to steal private keys by infecting official computers used by prosecutors, this scenario is considered less likely. Other possibilities include leakage of the private key due to shared custody of the seized assets or intentional misappropriation by an internal staff member responsible for managing the assets.
Regardless of the cause, prosecutors are unlikely to avoid responsibility for failing to properly safeguard the private keys and for not detecting the loss for more than six months.
The missing Bitcoin is believed to be linked to a 2021 investigation into a family accused of operating illegal gambling and unlicensed derivatives trading websites. During the investigation, police identified approximately 1,800 Bitcoins held by the suspects and began seizure procedures by transferring the assets to an investigative wallet.
Due to daily transaction limits, the seizure process took place over several days, during which time an unknown party allegedly used the private key to transfer the Bitcoin elsewhere. As a result, investigators ultimately secured only about 320 Bitcoins, which were later handed over to prosecutors in the form of a hardware wallet.
Family members of the suspects were charged on suspicion of diverting the missing Bitcoin, but the allegations were not conclusively proven in court. The whereabouts of the remaining 1,400 Bitcoins remain unknown.
Notably, the 320 Bitcoins successfully seized were transferred to a new wallet owned by investigative authorities, making it technically impossible for them to be stolen using the same method, according to officials.
Prosecutors have declined to provide further details, stating that they cannot confirm any information related to the case.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
