According to local reports, the Gwangju District Prosecutors’ Office in South Korea has launched an internal audit after losing 320.88 Bitcoin ($BTC) to a phishing attack during a routine asset management procedure.
The digital assets, worth approximately 40 billion won ($29 million), were originally seized from an illegal gambling ring in 2021 and were being held as criminal proceeds.
NEWS: South Korean authorities say they recovered about $21M in stolen Bitcoin after freezing exchange transactions.#Bitcoin #Crypto #Scam pic.twitter.com/BJ6ZzZR06x
— Roundtable Network (@RTB_io) February 19, 2026
Officials accessed fake wallet site during handover
According to an internal audit revealed on Wednesday, investigators accessed a fraudulent e-wallet website in August 2025 while attempting to verify the contents of a cold wallet stored on a USB device. The incident occurred during a work handover process, where officials mistakenly entered credentials into a site designed to mimic a legitimate cryptocurrency platform.
The breach was only discovered recently during a final inspection to transfer the $BTC to the national treasury. While prosecutors initially claimed the funds were stolen by external hackers, recent blockchain data from February 19, 2026, shows the 320 $BTC briefly returned to the prosecution’s original wallet address (bc1qsc…cpkc84) before being transferred to two new wallets.
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This unusual movement has led analysts to investigate the possibility of internal misconduct or a sophisticated self-fabrication attempt.
Growing concerns over institutional asset custody
This high-profile loss highlights the risks of managing digital assets without robust security protocols. In a similar security incident, Curve Finance recently urged its users to reconsider governance votes after a bridge exploit. Such events emphasize that even institutional bodies are not immune to social engineering and smart contract vulnerabilities.
The Gwangju prosecution has secured the mobile phones of five investigators for digital forensic analysis. Despite the initial siphoning of funds, officials stated they are doing their utmost to recover the assets, noting that the $BTC has not yet been liquidated into cash.
Authorities later tracked down the Bitcoin
South Korean prosecutors traced and recovered the missing Bitcoin, with reports putting the recovered amount at more than $21 million at the time. Investigators reportedly identified the operator behind the fraudulent website used in the phishing scheme and regained control of the assets.
In February and early March 2026, prosecutors sold 320.8 BTC that had been recovered from the incident. The sale generated approximately 31.6 billion Korean won, or $21.5 million, which was transferred to the national treasury.
The large difference between the original reported value of around $47 million and the eventual $21.5 million proceeds showed the substantial decline in Bitcoin’s price between the initial reports and the eventual sale, rather than another loss of the coins.
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