South Korean prosecutors have sold 320.8 Bitcoin worth about $21.5 million after recovering the funds from a hacker. The liquidation highlights serious concerns about how authorities manage seized cryptocurrency.
The Gwangju District Prosecutors’ Office handled the sale over an 11 day period. Officials transferred the proceeds to the national treasury after completing the transaction.
Authorities originally seized the Bitcoin during an investigation into a cross border online gambling network. The criminal operation ran between 2018 and 2021 and used cryptocurrency to move illegal profits.
However, the case took a surprising turn in August 2025. Hackers stole the Bitcoin from government custody through a phishing attack targeting officials who managed the wallet.
Hacker Returns Stolen Bitcoin
Investigators later tracked the stolen funds through blockchain records. Law enforcement agencies then contacted domestic and international crypto exchanges.
Authorities asked exchanges to block transactions connected to the stolen wallet addresses. This step effectively stopped the hacker from converting the Bitcoin into cash.
Soon after the restrictions took effect, the hacker returned the funds.
Prosecutors then moved the recovered Bitcoin to a secure exchange wallet. They sold the assets gradually to reduce potential market disruption.
Security Gaps in Crypto Evidence Storage
The incident revealed major weaknesses in how law enforcement stores digital assets.
Officials admitted that routine inspections focused mainly on physical storage devices. They rarely checked the actual cryptocurrency balances stored on those devices.
An earlier audit also uncovered another troubling case.
Key issues identified include:
- Poor verification of cryptocurrency balances in evidence wallets
- Weak private key management practices
- Limited cybersecurity training for officials handling digital assets
- Lack of centralized storage systems for seized crypto
Authorities believe these weaknesses allowed the theft to go unnoticed for months.
Government Reviews Crypto Custody Rules
South Korea’s National Police Agency and financial regulators are now reviewing cryptocurrency custody procedures.
Officials are discussing stronger auditing systems and centralized digital asset storage. These measures aim to protect crypto seized during criminal investigations.
As cryptocurrencies appear more often in financial crimes, governments face new challenges. Public institutions must now build stronger cybersecurity frameworks to safeguard digital evidence.
