South Korean Tax Authority Loses $4.8M in Crypto Due to Mnemonic Phrase Leak

South Korea’s National Tax Service (NTS) inadvertently leaked a cryptocurrency wallet recovery phrase in a press release, resulting in the loss of nearly $4.8 million in seized digital assets. The unredacted mnemonic phrase, displayed alongside a confiscated Ledger hardware wallet, allowed unauthorized parties to drain the funds by February 27.

This marks the third major crypto custody failure by Korean authorities in recent months. The NTS had initially seized 8.1 billion won ($5.6 million) from 124 tax delinquents, including the wallet tied to an individual identified as 'Mr. C.' Experts emphasize that a mnemonic phrase serves as a master key, requiring no additional authentication for access.

Blockchain analysts, including Hansung University’s Professor Cho Jae-woo, traced the on-chain movement of the stolen funds. The incident underscores systemic vulnerabilities in governmental handling of crypto assets, compounding regulatory scrutiny in South Korea’s digital asset landscape.