South Korean authorities lose over $4.8 million in crypto after posting mnemonic recovery phrase online — stolen PRTG tokens part of funds seized by National Tax Service from high-value tax evaders

Source: Tom’s Hardware

Incident Overview

South Korea’s National Tax Service (NTS) lost over US $4.8 million in cryptocurrency after it posted a photo of a hardware wallet that stored the private keys for more than 4 million Pre‑Retogeum (PRTG) tokens. The image also showed a handwritten note containing the wallet’s mnemonic recovery phrase. According to the Maeil Business Newspaper (machine‑translated), the photo was part of a press release promoting the agency’s crackdown on “high‑value and habitual delinquents,” noting that the raid had seized KRW 8.1 billion (≈ US $5.4 million) in assets.

How hardware wallets work

Hardware wallets do not store the cryptocurrency itself; they store the private keys that control blockchain addresses. Access to the tokens requires the PIN and the private keys. If the hardware wallet is lost and no backup of the keys exists, the funds become permanently inaccessible. To prevent this, most devices generate a mnemonic seed phrase during setup, which can recreate all private keys and addresses even without the physical device.

Previous gaffe involving South Korean authorities

This is not the first major mistake by South Korean officials. In the previous month, the National Police Agency discovered that 22 Bitcoin (≈ US $1.5 million) had gone missing after the agency failed to transfer the seized BTC to its own wallet. The hardware wallet was physically in police custody, but the original owner had previously given the mnemonic seed phrase to a hacker in exchange for cash, resulting in the loss of the assets.

Broader context

Cryptocurrencies have existed since Bitcoin’s launch in 2009, but they only entered mainstream awareness around 2017 when Bitcoin peaked near US $20,000. Many public agencies are still adapting to virtual assets, despite existing policies in South Korea. Repeated costly errors highlight the learning curve for government employees handling digital assets, underscoring the need for stricter operational safeguards.