Concerns over the safety of state-held digital assets have surfaced after South Korean prosecutors began an internal investigation into the disappearance of seized bitcoin from official custody. The issue reportedly emerged during an internal audit in the Gwangju District, pointing to possible lapses in how confiscated cryptocurrency was stored and managed.
According to local reports, authorities suspect the missing digital assets may have been siphoned off during administrative handling, potentially following a phishing-related breach. Early findings suggest officials responsible for managing the seized bitcoin may have been targeted through impersonation or deceptive communications.
Officials have confirmed the investigation but have not shared detailed information, citing the sensitive nature of the case. Efforts are currently focused on identifying how access to the assets was compromised and on tracing the present location of the missing bitcoin.
The incident is being seen as a rare case of a government agency itself falling victim to crypto-related fraud. While phishing attacks and digital asset thefts are common among individual investors and private platforms, this episode highlights that public institutions are also exposed to similar risks.
Investigators are reviewing whether access credentials, private keys, or recovery phrases linked to the seized assets were disclosed after officials were misled. Phishing attacks typically involve fraudsters posing as trusted entities to extract sensitive information, giving them irreversible control over crypto wallets.
Unlike traditional financial systems, cryptocurrency transactions cannot be reversed once completed. Any security lapse can therefore result in permanent losses. Experts note that secure custody of digital assets requires advanced infrastructure, layered authentication, and strict operational controls, areas where many public agencies are still evolving.
The case comes amid a sharp global rise in crypto fraud. Industry estimates show scams and fraudulent activities caused losses of about $17 billion worldwide in 2025, largely driven by impersonation and phishing schemes. The growing use of artificial intelligence, including deepfake messages and automated attacks, has further increased the scale and sophistication of such crimes.
Authorities are also expected to review how seized cryptocurrencies are handled across South Korea’s law enforcement and judicial systems. The outcome may influence future policies on managing state-held digital assets, both domestically and globally.
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