Alert in Seoul: Investigation into the disappearance of Bitcoin in police custody due to possible internal breach

The recent loss of digital assets under state custody in South Korea reveals the urgent need for governments to implement multi-signature protocols and rigorous audits to protect government blockchain infrastructure.

Blockchain technology has proven to be one of the most robust advances in the history of computer security because it offers a immutable and transparent record of every financial transaction. However, the recent incident at the Gangnam police station in Seoul has highlighted a vulnerability that lies not in the decentralized network, but in the human management of the keys that grant access to those assets. 

South Korean authorities confirmed that 22 BTC, valued at approximately $1,5 million, recently disappeared from a cold wallet which had remained under their protection since 2021. 

This incident adds to a larger loss of 320 BTC at the Gwangju Prosecutor's Office, raising the debate about how governments should adapt to an environment where digital security depends on strict governance protocols and not just the physical possession of a device.

Human error and phishing: lessons learned from the Gyeonggi and Gwangju cases

The internal investigation initiated by the Gyeonggi Provincial Police Agency Bukbu It sheds light on a structural problem in the handling of seized evidence. The Gangnam case is particularly striking because the physical storage device, a USB hardware wallet designed to keep private keys off the internet, It remained intact at the police facilities. 

Despite this physical isolation, the Bitcoin funds stored in the cold wallet were transferred to an external address without the monitoring systems detecting the activity in time. According to the Reports Locally, the movement of these bitcoins occurred shortly after the original investigation was suspended 5 years ago, suggesting a possible exploitation of credentials or internal involvement which the authorities are trying to clarify through exhaustive audits.

On the other hand, the situation in the Gwangju District Prosecutors' Office It shows a different facet of operational risk when managing cryptocurrencies. 

In August 2025, during a routine transfer of 320 BTC linked to an illegal gambling case, an administrative employee mistakenly accessed a site of PhishingThis oversight exposed the access keys and allowed external actors to drain the digital assets. 

According to experts who have analyzed the case, the lack of cross-verification mechanisms meant that the loss was only detected months later, in January 2026, during a national review by investigative agencies. Both events demonstrate that, although the blockchain is virtually impenetrable from the outside, The human interface that interacts with it requires a much more sophisticated security architecture than that used for traditional assets.

A government security solution

The difference between success and failure in state custody of crypto assets appears to lie in the implementation of multi-signature schemes. While in South Korea asset losses have reached critical levels, other jurisdictions have adopted delegated governance models that minimize individual error. 

Analysis by experts like Ki Young Ju, director of CryptoQuant, indicates that the Korean government has seized a total of 2.333 BTC across various operations, but has lost track of 1.742 BTC. This figure represents a 75% loss of the assets in custody, an alarming statistic for any financial or governmental entity. 

The network of Bitcoin offers full traceability On block explorers, anyone can track the movement of funds in real time. However, if a private key falls into the wrong hands through carelessness or malice, there is no way to reverse the transaction; the bitcoins are gone forever. Other countries avoid these pitfalls by using multi-signature schemes, where multiple keys must approve any transaction, along with delegated governance that distributes responsibility and reduces the risk of isolated failures.

Currently, governments acting as effective custodians have begun to incorporate constant audits and eliminate individual access to the private keys of crypto assets. In this way, they seek to make state custody a robust process, capable of withstanding both negligence and external threats.

Digital custody: the challenge of modern justice

In the realm of digital seizures, the risk of internal misappropriation of funds remains a latent threat, although the transparency of blockchain ultimately exposes any attempt at abuse. In the past, cases like that of the former agent Shaun Bridges In the United States, they revealed how even high-ranking officials can fall into the temptation of manipulating funds. 

Bridges, who was part of the site investigation Silk RoadHe admitted to misappropriating more than 1.600 bitcoins thanks to his privileged access within the operation. Following incidents like this, major Western powers strengthened their legal and technological structures to ensure that seized assets are safeguarded in highly secure digital environments.

The recent situation in Seoul has once again highlighted the need to rethink how law enforcement agencies handle digital assets. Blockchain offers advantages far surpassing traditional financial systems, as it allows for the establishment of automated rules for fund transfers and requires validation from multiple signatures distributed across different locations. 

The real challenge, however, lies not in the technology itself, but in governments' ability to adapt their processes to the level of complexity involved in digital custody. Modernizing the justice system means building teams prepared to operate in an environment where information and value circulate in code. Safeguarding these assets requires technical expertise, ethical rigor, and a deep understanding of the new financial paradigm imposed by the digital age.