South Korea’s National Tax Service is facing scrutiny after a security lapse in an official press release exposed the recovery phrase of a confiscated crypto wallet, with blockchain data indicating that millions of dollars in tokens were subsequently moved.
According to local reports, the incident occurred after the National Tax Service published images of hardware wallets seized from high-value tax delinquents. One of the photos reportedly displayed a mnemonic recovery phrase without redaction. In crypto systems, a mnemonic phrase functions as the master key to restore wallet access, enabling full control over the associated assets from anywhere in the world.
Shortly after the release, on-chain records showed that approximately 4 million PRTG tokens valued at about 4.8 million dollars were transferred out of the wallet in a series of transactions. Data from Etherscan indicates that a small amount of Ether was first deposited into the address to cover gas fees before the tokens were moved in three separate transfers.
On-chain movements raise security concerns
Blockchain analysts noted the speed of the transactions following the publication of the images, suggesting the funds may have been accessed using the exposed recovery phrase. The tokens involved were identified as Pre Retogeum PRTG, an Ethereum-based asset.
Security experts have long warned that storing or photographing mnemonic phrases digitally exposes holders to theft. In this case, the phrase appeared in an official government communication, raising broader questions about institutional crypto custody standards.
Institutional custody practices under the spotlight
The episode underscores the operational risks public agencies face as digital asset seizures become more common. As governments increasingly confiscate crypto holdings linked to tax or criminal investigations, secure handling of private keys and recovery phrases is becoming critical infrastructure.
The National Tax Service has not publicly confirmed whether the transferred tokens were irretrievable at the time of reporting.
Meanwhile, South Korea plans to increase oversight of online investment promotions. New legislative proposals would require cryptocurrency and stock influencers to publicly share their financial interests and any paid partnerships.
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