Security lapse exposes NTS wallet seed phrase; seized crypto moved to insured private custodians

South Korea’s National Tax Service (NTS) is seeking a private custodian to hold seized cryptocurrency after a security lapse exposed a wallet seed phrase, revealing government-held assets and enabling unauthorized transfers ^{[1] [2]}.

Reports indicate the breach involved about $4.8 million in assets; in response, authorities have transferred seized cryptocurrency to third-party custodians following the compromise ^{[3] [2]}.

As part of the shift to external custody, the NTS is prioritizing custodians with insurance coverage and proven operational track records, and plans to establish a dedicated oversight team to centralize management of confiscated assets ^{[4] [1]}.

The NTS has initiated a selection process for private custody providers to secure confiscated crypto and prevent similar security lapses in the future ^{[1] [4]}.