Recent enforcement actions by South Korea’s National Tax Service have led to the seizure of crypto assets from 124 significant tax evaders, amounting to approximately 8.1 billion won (around $5.6 million). However, a critical blunder occurred when law enforcement shared high-resolution images of the confiscated Ledger hardware wallets, which inadvertently displayed the mnemonic recovery phrases necessary to access the wallets.
This exposure compromised the security of the seized assets, allowing an unidentified individual to utilize the visible seed phrases. Following this, they added ether to one of the addresses to facilitate transaction fees, allowing them to transfer around 4 million Pre-Retogeum (PRTG) tokens, valued at about $4.8 million at the time. Concerns have been raised regarding the tax authorities' understanding of virtual assets, as noted by a professor from Hansung University, highlighting the significant financial loss to the national treasury.
Due to the nature of cryptocurrency, recovery of the stolen funds poses challenges, particularly since there is no central authority to reverse transactions. The incident underscores ongoing issues with law enforcement's handling of seized crypto assets, as a similar mishap occurred in November 2021 when the Gangnam Police seized bitcoin during a hacking investigation.