South Korea finance minister pledges review of seized crypto custody after recovery phrase leak

South Korea will urgently review seized crypto management and tighten custody controls after a National Tax Service (NTS) error led to the reported unauthorized transfer of confiscated tokens, the country's finance chief said.

"Regarding the recent NTS digital asset information leak incident, the government will, together with relevant agencies such as the Financial Services Commission and the Financial Supervisory Service, inspect the status and management of digital assets held by government and public institutions through seizures from delinquent taxpayers," Deputy Prime Minister and Minister of Finance and Economy Koo Yun-cheol said on Sunday in a translated post on X.

Koo added that authorities will "promptly establish and implement measures to prevent recurrence, including strengthening digital asset security management." Koo also noted that the country does not hold cryptocurrencies except assets obtained during enforcement actions, such as seizures.

The official did not provide details on specific measures or a timeline for the heightened inspections. The Block has reached out to the ministry for further information.

Koo's statement followed mounting criticism over a Feb. 26 NTS press release that inadvertently exposed the recovery phrase of a seized crypto wallet. Onchain data later showed roughly 4 million PRTG tokens — theoretically worth about $4.8 million but with very limited liquidity — were moved out shortly after its publication, according to local newspaper Korea JoongAng Daily.

Authorities are also reviewing claims that the assets were returned, the report said. The Korean National Police Agency's Cyber Terror Response Division said it received a report Saturday from an individual who claimed to have accessed the crypto after seeing the exposed recovery phrase and sent it back the next day. Police plan to verify the account, per the report.

The NTS leak has intensified scrutiny of how Korean authorities safeguard confiscated crypto after a series of custody failures across agencies. Since January, prosecutors and police have reported missing or drained seized coins, including 22 BTC lost from a Gangnam police vault and earlier losses at a district prosecutors' office, prompting nationwide audits of government crypto holdings.