Police lose $2m in Bitcoin: Experts call on law enforcers to overhaul security

Security experts have called on South Korean law enforcement agencies to overhaul their crypto management routines after police say they “lost” just under $2 million worth of Bitcoin confiscated during a criminal investigation.

Officers did not explain how the Bitcoin, kept on 22 USB thumb drives in a sealed vault in a police station in Seoul’s Gangnam District, had disappeared, leaving only the drives behind, South Korean newspaper Dong-A Ilbo reported.

Police only confirmed they are “investigating the circumstances surrounding the loss of confiscated Bitcoin.”

The revelations come hot on the heels of the news that prosecutors in the South Korean city of Gwangju last month admitted to “misplacing” over $28 million worth of Bitcoin confiscated from suspected online gambling operators in November 2021.

Investigations continue

Police in Seoul said they’d discovered the loss after the National Police Agency ordered an audit of all confiscated crypto held in cold wallets following the Gwangju case.

The lost Bitcoin was reportedly voluntarily submitted by a suspect during an investigation that dates back to November 2021. The investigation has since been suspended, but the cold wallets remained in police custody.

Unnamed security experts told South Korean newspaper Segye Ilbo the possibility of insider involvement could not be ruled out.

The fact that the Bitcoin had apparently been removed from the drives, leaving the devices intact, raises suspicions that someone with direct access to the cold wallets or their seed phrases may have been involved, the experts said.

The security officials called on the police and public prosecutors to “urgently and fundamentally redesign” their crypto management systems.

An inquiry in the Gwangju case has found evidence the Bitcoin was likely lost by prosecutors who had tried to use online tools to check how much Bitcoin was in cold wallet devices held in their own vaults.

Investigators say the prosecutors connected the wallets to a phishing website that had been disguised as a “cold wallet checker,” allowing criminals to steal the contents of crypto wallets.

The prosecution service says the coins were lost in August during a staff changeover. The Gwangju investigation is ongoing.

Tim Alper is a News Correspondent at DL News. Got a tip? Email him at tdalper@dlnews.com.