South Korea's National Tax Service shows mnemonic phrases, 4.8 million USD worth of cryptocurrency stolen! The thief returned it only to steal it again

South Korea’s National Tax Service accidentally leaks seed phrases, leading to the theft of $4.8 million worth of cryptocurrency seized. The first thief turned himself in and returned the stolen funds, but then another person stole them again. Authorities are actively investigating.

South Korea’s National Tax Service accidentally leaks seed phrases, leading to stolen seized crypto assets

In recent days, the South Korean National Tax Service disclosed seed phrases in a press release, resulting in the theft of seized cryptocurrencies, which caused a stir in the crypto community. There is now a follow-up: the thief voluntarily returned the stolen coins, but they were stolen again by someone else…

According to The Chosun Ilbo, on February 26, when the National Tax Service announced the confiscation of a delinquent taxpayer’s crypto cold wallet, seed phrases were accidentally leaked in a photo within the press release. Subsequently, approximately $4.8 million worth of cryptocurrency in that wallet was stolen.

Image source: The Chosun Ilbo, South Korea National Tax Service press release When the South Korean National Tax Service announced the seizure of a delinquent taxpayer’s crypto cold wallet on February 26, seed phrases were accidentally leaked in a photo within the press release.

Seed phrases are passwords used to recover lost cryptocurrencies. Holding a seed phrase is like having access rights; it allows access to cryptocurrencies from any location.

The tax agency explained that the leaked seed phrase was for a type of cryptocurrency that is only traded on a single exchange with very low trading volume. Large-scale trading could cause market prices to crash, so the actual loss was minimal. As long as the token is deposited into an exchange, the related account will be immediately frozen, and transactions can be blocked through the crypto company’s blacklist mechanism.

Thief voluntarily returns, claims curiosity was the reason

On the same day the tax agency issued the press release, an unknown individual used the leaked seed phrase to steal the cryptocurrency. The tax agency then used its own crypto tracking tools to investigate the leak and requested police intervention.

After the incident was exposed, a man voluntarily turned himself in to the police, claiming that he was curious after seeing the leaked seed phrase and stole the coins, but has since returned the stolen funds and is reflecting on his actions.

Thief returns, then stolen again

Unexpectedly, the returned cryptocurrency disappeared again just two and a half hours later.

Another hacker stole the returned coins once more. South Korean police stated that the stolen crypto has not yet been recovered. The Chosun Ilbo reports that as of March 4, the Cyber Terror Investigation Team of the Seoul Metropolitan Police is still tracking the hacker and the whereabouts of the crypto.

South Korean professor criticizes mishandling by tax authorities

Faced with consecutive crypto thefts, Professor Yeom Heung-yeol of Suncheon Hyang University pointed out that, since the seed phrase has already been leaked, the National Tax Service should have taken basic protective measures such as transferring the tokens to another wallet, but the authorities did not take such actions.

The tax agency admitted in a statement that this was an unavoidable mistake and promised to strengthen their overall security system.

This is not the first time a South Korean government agency has mishandled such a situation. The Korea JoongAng Daily reports that in 2021, the Seoul Gangnam Police Department entrusted 22 bitcoins (about $1.5 million) and their seed phrases to a third party for safekeeping, but they were stolen. The South Korean authorities faced scrutiny, and the perpetrator of that theft was recently detained.

Further reading:
What is the safest way to store seed phrases? Experts reveal four security levels: People who do “this” are more likely to be robbed