South Korean Government Blunder Exposes Ledger Wallet Seed Phrase, Triggers $4.8M Crypto Theft

A major security lapse by South Korea’s government exposed a Ledger wallet’s recovery phrase, enabling the theft of roughly $4.8 million in digital assets.

Colin Wu spotlighted the incident today, citing a report from local outlet Maeil Business News Korea. The episode has reignited discussion over deep institutional gaps in crypto custody and operational security. 

Key Points 

• South Korea’s government suffered a major security lapse that exposed the recovery phrase for a Ledger wallet. 
• The seized wallet reportedly held 8.1 billion won (about $5.61 million) in digital assets before the heist. 
• Upon gaining access to the wallet, the attacker transferred 4 million Pre-Retogeum (PRTG) tokens, worth $4.8 million, from the exposed wallet. 
• The tax agency has not released an official statement addressing the incident. 

Government Mistake Leads to Loss of $4.8M in Crypto Asset 

According to the report, South Korea’s National Tax Service (NTS) unintentionally triggered the multimillion-dollar heist. Notably, the tax agency published unredacted images of a seized hardware wallet containing 8.1 billion won (about $5.61 million) in digital assets, along with its recovery phrase, in an official press release. 

The disclosure came during a public announcement detailing enforcement actions against high-value tax delinquents. One of the uploaded images clearly showed a Ledger cold wallet placed next to a handwritten seed phrase.

Shortly after the release, blockchain analysts detected suspicious activity linked to the exposed wallet. An unidentified address first sent a small amount of Ethereum to cover transaction fees, then transferred 4 million Pre-Retogeum (PRTG) tokens out of the wallet. The stolen funds amounted to an estimated $4.8 million, according to Maeil. 

Experts Criticize Government Over Crypto Heist

As expected, the incident sparked sharp criticism from blockchain experts. Professor Hwang Seok-jin of Dongguk University likened the mistake to publicly posting bank passwords and security cards. He stressed that such negligence erodes public trust and jeopardizes national efforts to recover assets.

Similarly, Professor Cho Jae-woo of Hansung University stressed that the breach cost the government a crucial opportunity to reclaim the seized assets for the national treasury, underscoring the severity of the oversight. 

Wallet Safety Remains Imperative 

Beyond institutional accountability, the episode reinforces the importance of safeguarding wallet seed phrases. Since mnemonic phrases grant unrestricted access to stored funds, any exposure can enable attackers to instantly drain assets from anywhere in the world.

Overall, the case has intensified calls for stricter digital asset custody standards, enhanced training for public officials, and clearer protocols for handling seized cryptocurrencies. 

As governments increasingly engage in crypto-related enforcement, this costly mistake serves as a reminder that traditional security practices remain inadequate in the blockchain era. In the meantime, the NTS has yet to issue an official statement about the incident.