South Korean Prosecutors Lose $48M in Seized Bitcoin to Phishing Scam

A routine asset inspection at the Gwangju District Prosecutors’ Office turned catastrophic when investigators lost approximately 70 billion won ($48 million) in seized Bitcoin to a phishing attack. The incident, first reported by Chosun Biz and Ohmynews, exposes a critical failure in government custody protocols just as state agencies ramp up digital asset seizures.

The Breach
The loss reportedly occurred in mid-2025 but was only disclosed this week. According to internal reports, an official accessed a fraudulent website while attempting to verify the balance of the seized assets. The Bitcoin was stored on a simple portable USB drive rather than an enterprise-grade custody solution. When the investigator connected the device and entered credentials on the spoofed site, the funds were drained.

The USB storage practice falls below standard industry protocols such as keeping credentials offline or requiring multiple approvals (multisig wallets) to move funds.

Institutional Context
This security lapse arrives shortly after South Korea’s Supreme Court formally classified Bitcoin as “electronic property” eligible for forfeiture, a ruling that has accelerated state confiscations. The Gwangju office’s reliance on consumer-grade hardware (USB drives) creates a dangerous single point of failure. This is not the district’s first custody issue; in 2021, authorities there faced scrutiny over 1,476 BTC that went missing during a police seizure operation involving a gambling ring.

Market Reaction
While the 70 billion won loss is significant for the state, it represents a fraction of daily volume and did not impact wider spot prices. Bitcoin traded sideways at $89,735 (-0.74%) on Friday, shrugging off the news as a localized governance failure rather than a systemic market threat. The Cyber Investigation Bureau of the National Police Agency has launched a probe to track the stolen funds.