South Korean Police Lose 22 BTC, Raising Custody Concerns

• Police and prosecutors lost large Bitcoin amounts, showing systemic failures in managing seized crypto.
• USB wallets alone aren’t enough; authorities lack tech and protocols to secure digital assets.
• Professional custody standards like multi-signature wallets could prevent future crypto losses.

The South Korean police are currently experiencing a serious crypto custody crisis. On February 13, 2026, the Gangnam Police Station reported that it had lost 22 Bitcoins worth approximately 2.1 billion won, or $1.5 million. The lost cryptocurrencies were seized from criminals, and this incident has exposed a weakness in the system for managing the seized cryptocurrencies.

Authorities discovered the loss during a nationwide audit triggered by a prior prosecutors’ office incident. Officials have not clarified which department handled the funds or how they disappeared, fueling growing concern about institutional readiness.

Less than a month ago, the Gwangju District Prosecutors’ Office reported an even larger loss: 320 BTC valued at $48 million. Investigators traced that seizure to a woman identified only as “A,” who, alongside her father, ran a Bitcoin gambling site.

The prosecutors found that 1,800 BTC had been smuggled into South Korea, with a portion stolen before authorities could secure it. Consequently, both police and prosecutors incidents share strikingly similar patterns, raising questions about law enforcement’s digital asset protocols.

Both cases involved USB hardware wallets. Although these wallets are secure for individual use, they need technical expertise to secure the private keys. Several custody failures are proposed by analysts. First, the authorities could have retained the confiscated USBs without transferring the Bitcoin to authority-controlled wallets, allowing the original owners to access the Bitcoin using the backup.

Second, if the wallets were created on computers connected to the internet, the private keys could have been compromised immediately.

Specialized custody companies can protect against such risks by using multi-signature wallets, hardware security modules, and strict separation between verification and access. In this way, it is much harder for theft to occur because more than one independent authorization is required for a transaction.

But the South Korean authorities do not have such systems in place. Without proper security systems, the seized cryptocurrency is highly susceptible to risks.