South Korea's Crypto Custody Debacle: Authorities Struggle with Digital Asset Management

South Korea's National Tax Service (NTS) has faced severe criticism for its handling of cryptocurrency assets, with the latest incident highlighting the risks associated with poor digital asset management.

An unredacted wallet recovery phrase was inadvertently published in a press release by the NTS on February 26, exposing sensitive information about a seized crypto wallet. The phrase, which is equivalent to a master key for accessing the wallet, was displayed alongside a Ledger cold wallet device in an image accompanying the press release.

According to experts, whoever possesses the mnemonic phrase can restore the wallet and withdraw its contents without any further authentication required. It appears that individuals with access to this information took advantage of the situation, transferring approximately $4.8 million worth of Pre-Retogeum (PRTG) tokens from the exposed wallet in three batches.

This is not an isolated incident, as South Korea has experienced two similar crypto custody failures in recent months. In January, the Gwangju District Prosecutors' Office reported that it had lost 320.8 Bitcoin worth over $21 million after a staff member accessed a phishing site while attempting to verify wallet storage during an asset handover.