South Korean tax agency exposes crypto wallet recovery phrase, loses $4.4 million

South Korea's National Tax Service (NTS) inadvertently exposed the recovery phrase for a seized cryptocurrency wallet, leading to the theft of approximately $4.4 million in digital assets. The incident occurred after law enforcement raids targeting 124 high-value tax evaders, which resulted in the confiscation of digital assets worth about $5.6 million, with further coverage provided by Bleeping Computer.

During a press conference announcing the successful operation, the NTS displayed images of a Ledger hardware wallet. Crucially, these images also revealed a handwritten note containing the wallet's mnemonic recovery phrase, essentially the master key to the assets. This critical information was not redacted, allowing an opportunistic individual to access and transfer four million Pre-Retogeum (PRTG) tokens, valued at approximately $4.8 million at the time, from the confiscated wallet.

On-chain analysis indicates the attacker first deposited a small amount of Ethereum to cover transaction fees before meticulously moving the PRTG tokens in three separate transactions. The press release has since been removed from the NTS website. 

Source: Bleeping Computer