South Korean authorities grapple with crypto security after $21.5M BTC liquidation

The South Korean Gwangju District Prosecutors’ Office authorities sold the huge Bitcoin haul seized from hackers and deposited the profits into the government treasury. Prosecutors disposed of 320.8 Bitcoin, raking in 31.6 billion won, about $21.5 million. They spread the BTC sales over 11 days to minimize potential market impact.

Initially, authorities had seized the cryptocurrency during a crackdown on a cross-border gambling platform operating from 2018 to 2021 that masked illegal proceeds using Bitcoin. Later, Gwangju authorities lost the seized Bitcoin in August 2025 when officials fell victim to a phishing scheme that allowed hackers to steal the funds. However, the breach went unnoticed until December. Though authorities recovered the BTC this February. According to one prosecutor, the hacker returned all the Bitcoin after authorities froze the assets across domestic and international exchanges, making it impossible to cash out.

South Korea’s investigations reveal a number of security shortcomings

Authorities did not discover the theft of the 320 BTC until December, as routine inspections focused only on the physical wallets rather than the assets inside them, and the issue was realized only as the process of retrieving the Bitcoin from the national treasury began.

Findings revealed that the staff responsible for the confiscated assets searched for a site on Google to verify the Bitcoin in a cold wallet and unknowingly entered a phishing page designed to resemble the legitimate one. The investigation revealed that, unaware of the phishing site, authorities entered a 24-word mnemonic key that granted full access to the wallet, resulting in the loss of all funds.

Now, even after the recovery of the funds, prosecutors in Gwangju still plan to conduct an internal inquiry into the case and continue efforts to identify the hacker.

The nationwide inquiry into Gwangju has also revealed that the Gangnam Police in Seoul has lost 22 BTC in a USB cold wallet since 2021. Since the wallet remained in place, officials are investigating internally to determine if it was involved. The authorities also blasted the National Tax Service after the group mistakenly included a wallet recovery phrase in a public report, resulting in 4 million PRTG tokens, worth $4.8 million, being sent to an unknown address.

Moreover, last month, Bithumb accidentally gave customers 620,000 BTC, leaving the exchange struggling to recover more than $40 billion in cryptocurrency. The exchange said it has corrected most of the credit errors, although 13 billion won ($9 million) remains unrecovered because some recipients sold or withdrew their funds before the error was discovered.

Bitmax has over $74 million in debt from Bitcoin purchases

Last year, some companies in South Korea adopted the Strategy’s approach, acquiring Bitcoin with borrowed money for their treasury. However, some of them were taking in Bitcoin with little consideration of their thin cash flows.

For instance, Bitmax, which held approximately 551 BTC, saw its balance sheet plunge. They disclosed in their Q3 2025 filing that debt rose from $4.4 million to $74 million over nine months, almost entirely due to convertible bonds issued to fund Bitcoin purchases. Its debt-to-capital ratio increased from 18% to 73%. Net losses in the first three quarters of 2025 totaled $52 million, comprising $43 million in derivative valuation losses related to convertible bonds and $6 million of operating losses. The company’s AR division results in very little cash, according to a local media outlet, and R&D spending was reduced by around two-thirds in the first half of 2025.

Nonetheless, Bitmax argues it is strengthening its revenue foundation. In mid-2025, it absorbed IL4U, partnered with Samsung SDS, and projected $22 million in yearly enterprise IT revenue. Whether that can sustain $74 million in debt is still uncertain.

On March 9, the company also announced a 4-for-1 stock consolidation to wipe out its previous losses. However, shares slid by more than 10% on the 10th, closing near $0.63.

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