Police Lost $1.4M in Seized BTC After Storing it in an External Cold Wallet

Two people have been arrested in South Korea in relation to a case in which police lost 22 Bitcoin, now worth $1.4 million, after storing the coins in a third-party cold wallet.

The news of the loss of 22 Bitcoin (BTC) was first reported by local media in early February, with more details about the case emerging as the Gyeonggi Northern Provincial Police Agency continues its investigation.

According to a report from South Korean publication Dong-A Ilbo on Wednesday, investigators found multiple policy breaches that ultimately led to the funds being stolen.

Under the station’s protocol, which had been in place for multiple years, any seized crypto is supposed to be stored in a cold wallet under full police control.

However, after BTC was seized via voluntary submission following a hack on a local exchange in November 2021, it was stored in a cold wallet owned by a third party related to the hacking case, which also had access to the wallet’s seed phrase.

To make matters worse, the police themselves also reportedly had no idea what the seed phrase was.

Funds pulled under strange circumstances

Police are still investigating the circumstances that led to the funds being stolen.

However, the South Korean outlet stated that an official from a company with access to the seed phrase gave it over to an individual known as “Mr. Jeong” as part of a borrowing agreement between the two.

Related: How a Bitcoin promotion error triggered a regulatory reckoning in South Korea

So far, two individuals have been arrested by the Gyeonggi Northern Provincial Police Agency in connection with the case.