South Korean authorities are investigating the unauthorized transfer of 22 Bitcoin previously held in cold storage at Seoul’s Gangnam Police Station. The disappearance, valued at approximately $1.45–$1.6 million based on Feb. 13 market prices near $66,000–$68,000 per Bitcoin was uncovered during a nationwide audit of seized digital assets.
Key Takeaways
- 22 Bitcoin held as evidence at Gangnam Police Station were transferred externally without authorization.
- The physical cold wallet device remains in police possession, pointing to potential internal or procedural vulnerabilities.
- The discovery follows a separate 320 BTC loss in 2025, prompting a nationwide audit of seized digital assets.
Audit Uncovers Missing Bitcoin From Dormant Case
The 22 Bitcoin had been voluntarily submitted in November 2021 during an investigation that was later suspended. The assets were stored offline on a USB-based cold wallet, a method typically used to isolate private keys from internet exposure. Despite the device remaining intact and physically secured, blockchain records indicate that the funds were transferred to an external wallet at an undetermined time.
The disappearance went undetected for years due to the case’s inactive status. The shortfall was only identified during a broader review initiated by the National Police Agency. The Gyeonggi Northern Provincial Police Agency is now leading the internal investigation into the timing, access controls, and potential involvement of authorized personnel.
National Review Triggered by Prior 320 BTC Incident
The nationwide inspection followed an August 2025 incident in which 320 Bitcoin were lost from the Gwangju District Prosecutors’ Office. That case, attributed to phishing-related credential compromise, resulted in losses valued at roughly $21 million at the time and up to 31.2 billion KRW based on market conditions.
In response, authorities began reviewing digital asset custody practices across frontline offices. The Gangnam discovery emerged during this process, reinforcing concerns about consistency in asset management standards between agencies.
Cold Storage Risks in Government Custody
Cold wallets are designed to mitigate remote hacking by keeping private keys offline. However, they do not eliminate operational vulnerabilities. In custody contexts, risks often shift from technical exploits to human and procedural factors.
Potential failure points include compromised seed phrase documentation, insufficient multi-signature safeguards, weak access controls, or inadequate periodic balance verification, particularly in dormant cases. Unlike exchange-held assets or hot wallets, offline storage depends heavily on disciplined key management and internal oversight.
Custody Lessons From Bitcoin’s Past
Bitcoin custody failures are not new. Early exchange collapses such as Mt. Gox in 2014, which resulted in the loss of approximately 850,000 Bitcoin, highlighted vulnerabilities in centralized platform security. More recently, the 2022 FTX collapse underscored counterparty risk rather than technical compromise.
However, government custody cases differ structurally. Whereas exchange failures often involved hot wallet exposure or commingled funds, recent South Korean incidents point to operational control gaps within cold storage frameworks.
The shift illustrates how custody risk has evolved from external cyber threats to governance and access management failures.
Legal Recognition Meets Custody Challenges
The incidents unfold against a shifting legal backdrop. In January 2026, South Korea’s Supreme Court affirmed that Bitcoin qualifies as an “object of seizure” under the Criminal Procedure Act, citing its independent manageability, tradability, and economic value, even when held via centralized platforms.
This ruling formalizes the state’s authority to confiscate and manage cryptocurrencies. However, it also increases expectations around secure handling. As enforcement expands, operational standards must evolve alongside legal recognition.
South Korea has positioned itself as a jurisdiction with strict but structured oversight of digital assets. High-profile enforcement actions, fraud trials, and broader regulatory reforms between 2025 and 2026 have reinforced its supervisory posture. The recent custody failures risk undermining that credibility.
Systemic Implications for Digital Asset Forfeiture
The back-to-back incidents underscore broader structural considerations for public-sector crypto custody. Dormant cases create detection lag, allowing unauthorized movements to go unnoticed for extended periods. Insider access or weak internal controls may present greater threats than external cyberattacks.
Recovery prospects remain uncertain. Once transferred, Bitcoin may be routed through mixers or cross-chain mechanisms, complicating forensic tracing efforts. Even with blockchain analytics tools, asset recovery is not guaranteed.
For governments globally, the episode reinforces the importance of standardized safeguards, such as mandatory multi-signature protocols, segregated custody responsibilities, regular third-party audits, and continuous balance monitoring regardless of investigative status.
The information provided in this article is for educational purposes only and does not constitute financial, investment, or trading advice. Coindoo.com does not endorse or recommend any specific investment strategy or cryptocurrency. Always conduct your own research and consult with a licensed financial advisor before making any investment decisions.
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Source: https://coindoo.com/bitcoin-seized-by-seoul-police-vanishes-after-internal-audit/
