On February 25, 2026, the Gyeonggi Northern Provincial Police Agency in South Korea announced the arrest of two suspects accused of stealing 22 Bitcoin from a police evidence storage account. The assets had originally been confiscated in November 2021 during an investigation into the “A Coin Foundation” hacking case.
However, instead of transferring the seized assets to an officially supervised hardware wallet, authorities continued using a cold wallet provided by the foundation under investigation. As a result, the mnemonic phrase was unlawfully obtained, and the assets were transferred through an information and communications network. Approximately USD 1.5 million worth of Bitcoin remains unrecovered.
This incident exposes multiple vulnerabilities within digital asset custody frameworks. While cold wallets offer offline security advantages, improper mnemonic phrase management can significantly amplify risk. Once a mnemonic phrase is compromised, full control of the assets is irreversibly lost. Furthermore, a former officer involved in the case had previously been convicted of bribery in 2024, highlighting that weaknesses in internal compliance controls and oversight mechanisms represent equally critical risk factors.
From a digital asset security management perspective, reliance solely on cold storage is insufficient to establish a comprehensive defense structure. Custodial institutions and law enforcement agencies must implement multi-layered security architectures, including multi-signature mechanisms, segregation of duties, audit trails, and real-time on-chain monitoring systems. Particularly in scenarios involving evidence management, asset freezing, and judicial seizure, the use of wallets from unclear or third-party-controlled sources should be strictly avoided.
Against this backdrop, the importance of KYT (Know Your Transaction) systems becomes increasingly evident. Through on-chain address risk scoring, fund flow tracing, and real-time abnormal transaction alerts, KYT can activate early-warning mechanisms at the first sign of irregular asset movement—reducing the lag between unauthorized transfers and detection. Professional on-chain risk control platforms such as Trustformer KYT systematically analyze historical address behavior, fund trajectories, and associated risk entities, providing compliance-grade monitoring support for both financial institutions and enforcement bodies.
As digital assets are progressively incorporated into regulatory and judicial systems, security is no longer solely a technical matter—it is fundamentally an issue of governance and compliance. Prediction markets, exchanges, foundations, and law enforcement agencies must establish a closed-loop framework covering storage, transfer, auditing, and monitoring. Integrating advanced on-chain compliance tools such as Trustformer KYT to enhance real-time surveillance and risk identification capabilities has become a critical strategy for preventing internal misuse and external attacks.
The South Korean police Bitcoin evidence theft case serves as a stark reminder to the market: in the blockchain ecosystem, private keys represent ownership. Only by combining institutionalized custody mechanisms with professional KYT monitoring systems can organizations build a truly sustainable digital asset security ecosystem.