South Korean authorities have arrested two people in connection with the disappearance of 22 Bitcoin that had been seized during a previous investigation and later went missing while in police custody.
The funds, now worth about $1.4 million, were originally obtained in November 2021 after a hack involving a local crypto exchange. Instead of being secured in a police-controlled wallet, the assets were placed in a cold wallet operated by a third party connected to the earlier case.
Local outlet Dong-A Ilbo first reported new details this week as investigators examined how the breach occurred and why the loss went unnoticed for several years.
Storage decisions and missing seed phrase
Under internal protocol, seized digital assets are supposed to remain in wallets fully controlled by law enforcement. In this case, investigators later found the Bitcoin had been stored in a third-party wallet that still had access to the seed phrase. Authorities also discovered that police did not possess the recovery phrase themselves, leaving the assets dependent on outside access.
Investigators say the funds were eventually withdrawn under unusual circumstances.
According to the report, an employee at a company that had access to the seed phrase later shared it with another individual, identified as “Mr. Jeong,” during a borrowing arrangement between the two.
The police agency confirmed that two individuals have been arrested as the investigation continues.
Earlier investigation tied to corruption case
The incident has drawn additional scrutiny because a police investigator involved in the original exchange hack case was sentenced in August 2025 on bribery charges after accepting money linked to the investigation.
Authorities only discovered the missing Bitcoin during a nationwide audit of seized crypto assets. The review was launched after a separate case in which 320 Bitcoin disappeared from the Gwangju District Prosecutors’ Office.
Oversight questions surface across the sector
The case comes amid broader attention on operational controls and asset handling within South Korea’s crypto industry.
Earlier this year, the exchange Bithumb faced regulatory review after an internal error mistakenly credited users with bitcoin during a promotional event, briefly distorting balances and trading activity before the issue was corrected.
While unrelated to the police investigation, the incident prompted scrutiny of internal safeguards and transaction oversight across crypto platforms in the country.
Tanya Petrusenko
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