Cryptocurrencies have long been used by criminals for tax evasion, allowing them to avoid getting dinged by things like capital gains taxes by investing in the digital assets.
In the United States, the federal justice system is only starting to crack down on the trend, a game of cat and mouse made difficult by anonymized accounts and transactions.
But in an announcement to publicize the results of recent raids on 125 tax evaders, which resulted in the confiscation of around $5.6 million worth of crypto, South Korea’s National Tax Service made a dunce-like mistake.
As Bleeping Computer reports, the agency released photos of a Ledger hardware wallet for crypto storage on February 27 — but failed to redact a handwritten note visible in the shots that exposed the accompanying wallet’s recovery or seed phrase.
The phrase allows anybody to circumvent the need for the physical Ledger device and initiate transfers.
Sure enough, it didn’t take long for an anonymous opportunist to deplete the wallet, worth around $4.8 million at the timeof the post — an embarrassing slip-up that directly undermined the cops’ efforts to clamp down on tax evasion.
According to local business newspaper Maeil, the anonymous thief withdrew four million Pre-Retogeum tokens, an obscure crypto token linked to energy trading, to their own wallet in three transactions after using a small amount of Ethereum to pay for the transaction.
However, as The Block points out, converting those tokens into fiat currency could prove difficult. The token is listed on a single exchange and has a market cap of just $12 million, meaning that turning four million of them into cash could be difficult. CoinMarketCap data suggests the thieves have yet to attempt laundering their bounty.
Nonetheless, the National Tax Service has since issued an apology following the faux pas.
“We deeply apologize to the public for the virtual asset leak incident. We will immediately trace the leak route, request a speedy investigation, and prepare thorough measures to prevent recurrence,” the agency wrote, as translated by Google.
“There is no excuse for this incident, and it is the fault of the National Tax Service,” the March 1 document reads.
Worse yet, the news comes less than two months after prosecutors in Gwangju, South Korea, were investigated after losing a “significant” portion of seized Bitcoin linked to a phishing incident.
Then, last month, 22 Bitcoin held in evidence mysteriously went missing from a cold wallet — indicating a bit of a trend for South Korean authorities.
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