S.Korea’s Tax Agency Leaked Crypto Master Key — and Got Robbed Twice

South Korea’s National Tax Service (NTS) is facing intense scrutiny after a leak of a private security key. This error led to the consecutive theft of 4 million seized PRTG tokens (approx. $4.8 million).

The debacle raises serious questions about whether the Korean government can securely manage the digital assets it seizes.

A Comedy of Errors

The incident began on February 26 during a press conference regarding high-value tax delinquents. The NTS distributed photos of seized cold-storage USB wallets to showcase its enforcement success. However, these images inadvertently included the “mnemonic code,” a 24-word master key used to access digital assets.

According to blockchain data and police reports, the PRTG tokens were stolen twice within 24 hours. The first breach occurred early on February 27. An individual, claiming to be an ordinary investor, used the exposed code to drain the wallet.

In a surprising twist, this “first hacker” contacted the police and media on February 28. He submitted a confession, stating he took the coins “like picking up waste paper” because it was too easy. He claimed he returned the full 4 million PRTG tokens to the NTS wallet shortly after.

The recovery was short-lived. Just two hours after the return, a second entity targeted the same vulnerable wallet. This second actor successfully transferred the entire balance to a wallet flagged for “fake phishing” activities.

Systemic Failures in Asset Management

Security experts criticized the NTS for failing to secure the returned funds. The agency did not move the assets to a new, secure wallet after the initial breach. This allowed the second thief to use the same exposed mnemonic code.

The NTS stated they cannot provide details due to the ongoing investigation. However, they maintained that no further administrative mistakes occurred during the second transfer.

The stolen asset, PRTG, is primarily traded on a single exchange, MEXC. Experts note that the $4.8 million valuation is purely theoretical, as the market is illiquid. “The actual realizable value is likely only a few thousand dollars,” said Professor Cho Jae-woo of Hansung University. Any attempt to liquidate such a large volume would cause the PRTG price to crash instantly.

Government Apologizes and Responds

The NTS issued a formal apology on March 1, accepting full responsibility.

“This is unequivocally the fault of the National Tax Service,” the agency said. It blamed the breach on the careless provision of original photos containing sensitive data to the media. The agency pledged an external security audit and stronger pre-release review procedures.

The NTS has requested a police investigation, and the National Police Agency’s Cyber Terror Response unit has opened a preliminary inquiry. Police are tracking which media outlets received high‑resolution images containing the mnemonic and who had access to them.

In recent months, the country’s prosecutors temporarily lost control of 320 bitcoin, while one of its police stations discovered 22 missing bitcoin from a vault. All three of Korea’s major investigative and enforcement bodies have now faced high‑profile failures in crypto custody.​ Analysts say law‑enforcement agencies must rapidly improve their technical competence and operational controls as criminals increasingly launder proceeds through crypto.