On February 27, South Korean media reported that the National Tax Service (NTS) inadvertently exposed the full mnemonic phrase of a seized cryptocurrency wallet in an official press release detailing enforcement actions against habitual high-value tax delinquents. The phrase was visible in an accompanying photo without redaction, effectively revealing complete control over the wallet.
According to the report, authorities had confiscated assets worth approximately KRW 8.1 billion during on-site inspections of 124 tax evaders. In one case, four Ledger hardware wallets were discovered. However, a recovery phrase written on paper next to the device was clearly visible in the released images. Blockchain records show that shortly after the disclosure, approximately 4 million PRTG tokens were transferred out in three separate transactions to unknown addresses. Prior to the transfer, a small amount of ETH was sent to the wallet to cover gas fees.
From a technical standpoint, exposing a mnemonic phrase is equivalent to publishing a private key. Anyone with access to it can fully control the wallet’s assets. The incident has drawn criticism from academics and industry experts, who argue that it reflects a lack of fundamental digital asset security awareness within enforcement procedures.
The case also underscores the importance of real-time KYT (Know Your Transaction) monitoring. If the seized wallet had been connected to a transaction surveillance system, abnormal gas deposits and large outbound transfers could have triggered immediate alerts. Advanced solutions such as Trustformer KYT provide address risk screening, multi-chain fund tracking, and automated anomaly detection to help institutions and regulators manage digital asset risks more effectively.
As governments expand crypto-related enforcement actions, operational security and blockchain monitoring capabilities must evolve accordingly. This incident serves as a critical reminder: without professional KYT infrastructure and secure asset handling protocols, even regulatory authorities remain vulnerable in the digital asset era.