How Did Authorities Lose and Recover the Bitcoin?
South Korean prosecutors have sold 320.8 Bitcoin that were briefly lost after a phishing attack disrupted government custody of seized crypto assets. The Gwangju District Prosecutors’ Office confirmed that the coins were sold at market prices and that the proceeds were transferred to the national treasury.
According to a report by The Chosun Ilbo, the sale generated 31.59 billion Korean won, or about $21.5 million. Authorities executed the transaction gradually over an 11-day period between Feb. 24 and March 6, splitting the liquidation into smaller batches to avoid disturbing market liquidity.
The Bitcoin had originally been confiscated in connection with an investigation into an illegal gambling website that allegedly processed about 390 billion won ($285 million) in wagers between 2018 and 2021. The crypto assets remained under government control until a custody transfer error led to the phishing incident last year.
Investor Takeaway
What Happened During the Phishing Incident?
The custody failure occurred in August 2025 when asset managers involved in the transfer of the seized Bitcoin were reportedly deceived by a phishing website. The mistake allowed the funds to be moved out of official custody and into a wallet controlled by a hacker.
Investigators later traced the missing Bitcoin to the external address. Authorities then asked domestic and overseas cryptocurrency exchanges to freeze transactions linked to the wallet, making it difficult for the attacker to convert or move the funds further.
The strategy appears to have worked. The Bitcoin returned to a government-controlled wallet on Feb. 17 after the exchanges restricted activity linked to the address. Two days later, prosecutors confirmed that the hacker had unexpectedly transferred back 320.88 Bitcoin, allowing authorities to regain control of the assets.
The coins were subsequently moved into a secure exchange wallet before prosecutors began the staged liquidation process later in February.
Why Do Authorities Sell Seized Crypto?
Government agencies that seize cryptocurrency during criminal investigations typically convert those holdings into fiat currency once legal proceedings allow it. Selling the assets removes custody risks and transfers the value into government accounts, often the national treasury.
In this case, prosecutors opted to sell the Bitcoin directly into the market rather than hold the digital asset. Dividing the sales over multiple days reduced the chance of sudden price pressure from a large one-off liquidation.
Authorities in several countries have adopted similar strategies when handling seized crypto. Large government wallets can attract attention from traders who monitor blockchain activity for signals of potential supply hitting exchanges.
Investor Takeaway
How Are South Korean Courts Approaching Crypto Losses?
Separately, South Korean courts are reviewing how cryptocurrency losses should be treated in personal debt restructuring cases. According to a report from EToday, newly established rehabilitation courts in Daejeon, Daegu, and Gwangju are preparing guidelines that would exclude stock and cryptocurrency investment losses from liquidation value calculations.
If adopted, the approach would treat crypto investment losses similarly to other asset losses rather than classify them as speculative debts that must be repaid in full. The change could lower repayment obligations for individuals entering court-supervised rehabilitation programs.
The proposed adjustment reflects a broader reassessment of how digital assets fit into financial regulation and legal frameworks in South Korea. As crypto participation has expanded, courts and regulators are gradually adjusting rules that were originally written for traditional financial assets.
