South Korean police have arrested two individuals suspected of embezzling 22 Bitcoins from police custody. A virtual asset company voluntarily surrendered the cold wallet containing the crypto back in 2021 when they requested the police to investigate a hacking incident. Police regulations require seized virtual assets to be moved to a cold wallet under the control of the local station and stored in a separate vault, but this was not followed in this case. Authorities believed the assets remained in custody because the cold wallet was thought to be secured by the police.
In January 2026, 320 Bitcoin went missing from the Gwangju District Prosecutors’ Office, prompting an audit that uncovered the 22 BTC theft at Gangnam Police Station. An official said the wallet owner borrowed the same amount from a hacker and provided the attacker with the mnemonic seed phrase needed to recover the private keys. Using that information, the hacker recovered the contents of the cold wallet and moved the 22 BTC as they pleased. Gangnam Police failed to confiscate the recovery code, enabling the theft to go undetected for some time.
South Korean authorities have since issued guidelines on handling seized digital assets, including transferring them to a cold wallet under investigative control; these rules had been published two months before the incident. The case underscores lapses in how virtual assets are safeguarded by law enforcement and underscores the need for strict adherence to asset-handling procedures.
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