Two Arrested After South Korean Police Lost $1.4M in BTC

South Korean police lost $1.4 million worth of seized Bitcoin after storing it in a third-party wallet that was later compromised, leading to the arrest of two suspects. The Gyeonggi Northern Provincial Police Agency confirmed on Wednesday that 22 BTC confiscated during a 2021 exchange hacking probe ended up in a wallet the department could not monitor or control, according to local reports.

How Did South Korean Police Lose Seized Bitcoin?

Multiple policy breaches enabled the theft of 22 Bitcoin that police seized after a local exchange hack in November 2021, according to South Korean publication Dong-A Ilbo. Under longstanding protocol, confiscated cryptocurrency must be held in a cold wallet under full police control. Instead, the BTC was placed in a cold wallet belonging to a third party connected to the hacking case, who also retained the seed phrase.

Police themselves reportedly had no knowledge of the seed phrase, according to the Dong-A Ilbo report, leaving them unable to verify whether the $1.4 million in digital assets remained secure. Investigators found that an official from a company with access to the seed phrase handed it to an individual identified only as "Mr. Jeong" through a borrowing arrangement between the two.

Two Suspects Arrested in Ongoing Investigation

The Gyeonggi Northern Provincial Police Agency has arrested two individuals in connection with the missing Bitcoin so far, though the investigation remains active. Authorities are still piecing together the full sequence of events that led to the funds being siphoned from the compromised wallet.

Adding another layer of complexity, an investigator who worked on the original exchange hacking case was sentenced in August 2025 on bribery charges, according to local media. That officer reportedly accepted payment in exchange for conducting a favorable investigation, raising questions about oversight within the department during the period the Bitcoin was stored improperly.

Nationwide Audit Uncovered the Missing Funds

The theft went entirely undetected for four years before a separate incident prompted the discovery. South Korean authorities launched a nationwide crypto audit after 320 BTC disappeared in a distinct case at the Gwangju District Prosecutors' Office, according to reports. That broader review ultimately flagged the discrepancy in the Gyeonggi police holdings.

The case highlights the risks of storing seized cryptocurrency outside direct institutional control, particularly when third parties retain access to private keys or seed phrases. Police protocol already mandated self-custody of confiscated crypto, but enforcement of that rule clearly failed in this instance.