South Korea Orders Crypto Audit After Lost Bitcoins and Data Leak

South Korea’s Financial Supervisory Service (FSS) announced plans to intensify investigations into suspected cryptocurrency price manipulation in 2026. The focus will be on tactics that undermine market order, including whale trading and schemes that exploit disruptions in exchange infrastructure. These investigations will target artificial price swings during deposit or withdrawal suspensions and coordinated trading mechanisms using APIs or social media to spread false information.

A critical error that exposed a crypto wallet’s recovery phrase led to a government review of seized crypto custody practices. This incident resulted in the unauthorized transfer of approximately 4 million PRTG tokens worth $4.8 million. Authorities will inspect the status and management of digital assets held by public institutions through seizures from delinquent taxpayers.

February 2026 marked the lowest monthly losses from crypto hacks and scams since March 2025, with $26.5 million stolen. Out of 15 incidents, only two accounted for most of the month’s losses, including a $10 million theft from YieldBlox’s DAO-managed lending pool.

Why the Move Happened

South Korea has launched a cross-agency probe into how public institutions handle seized digital assets following repeated custody failures. This follows an incident where the National Tax Service (NTS) leaked a wallet seed phrase, leading to the loss of 4 million PRTG tokens.

The government plans to review the status and management of all digital assets obtained from delinquent taxpayers and strengthen security controls. This review comes after repeated custody failures, including the loss of 22 BTC from a Gangnam police vault and earlier incidents at district prosecutors’ offices.

How Markets Responded

Bitcoin remained stable near $63,000 as U.S. banks reported a 9.2% quarter-over-quarter decrease in unrealized securities losses in Q4 2025. The reduction in losses, now at the lowest level since Q1 2022, has eased systemic risk concerns.

The banking sector posted record profits for 2025, with a 10% increase in net income compared to 2024. This stability has supported confidence in the broader financial system and indirectly in crypto markets.

What Analysts Are Watching

Authorities are inspecting the management of digital assets held by public institutions and aim to strengthen digital asset security management. The NTS leak has intensified scrutiny of how Korean authorities safeguard confiscated crypto after a series of custody failures across agencies.

CoinEx released its latest Proof of Reserve update, demonstrating a continued commitment to transparency and asset security. The exchange maintains reserve ratios above 100% for major assets, ensuring full backing of user deposits.

The FSS is increasing the use of AI-powered tools to monitor crypto markets and reduce reliance on manual detection of manipulation. The FSS has also established a task force to prepare for the implementation of the Digital Asset Basic Act, focusing on disclosures, exchange oversight, and licensing standards.