Probe Into Missing Seized Bitcoin

Every week, Information Security Media Group rounds up cybersecurity incidents in digital assets. This week, South Korean prosecutors probed missing, seized bitcoin. CZ said a Trump pardon eased his conviction burden. A former Olympian arrested in a crypto-linked drug case. The U.S. Securities and Exchange Commission dropped litigation against Gemini Earn. Major hacks and a $37 million laundering prison sentence.

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South Korean prosecutors are investigating the disappearance of a “significant” amount of bitcoin that went missing while under state custody, reported Yonhap News. An internal review at the Gwangju District Prosecutors’ Office flagged the loss, prompting a formal investigation.

Prosecutors said the bitcoin vanished around mid-2024, stating a phishing incident is the most likely cause. Officials declined to disclose how much cryptocurrency is missing or its value.

South Korea’s legal basis for confiscating cryptocurrency dates to 2018, when the Supreme Court ruled that cryptocurrencies qualify as intangible assets with property value. The Supreme Court expanded seizure powers in December, saying that bitcoin held on centralized exchanges is also subject to confiscation.

Binance founder and former CEO Changpeng Zhao said a pardon from U.S. President Donald Trump removed lingering “psychological burden” from his November 2023 guilty plea to one count of enabling money laundering in an interview with CNBC at the World Economic Forum in Davos.

Zhao served a four-month prison sentence after pleading guilty in 2023 to violating the U.S. Bank Secrecy Act by failing to implement adequate anti-money laundering controls at Binance. Although he had completed his sentence, Zhao said the felony conviction continued to weigh on him. He added that he never expected to go to prison, mentioning that similar cases historically resulted in fines, deferred prosecution agreements or home confinement.

Zhao described his early days in prison as “brutal” but said he treated the experience as something to endure and put behind him. He denied lobbying Trump directly or having any personal ties to the president.

Addressing other controversies, Zhao rejected claims that he played a central role in the collapse of FTX, saying Binance abandoned acquisition talks after losing confidence in FTX’s disclosures. Looking ahead, Zhao said he does not actively trade crypto but believes bitcoin could enter a “supercycle” in 2026 as the U.S. and other governments adopt more crypto-friendly policies.

U.S. authorities arrested Ryan Wedding, a former Olympic snowboarder accused of running a violent transnational drug trafficking organization that prosecutors say used cryptocurrency and stablecoins to move and launder cocaine proceeds.

Wedding, 44, was taken into custody in Mexico City and transferred to the United States, FBI Director Kash Patel said. Wedding appeared on the FBI’s 10 Most Wanted Fugitives list last year, with a reward of up to $15 million offered for information leading to his arrest.

Prosecutors allege Wedding oversaw a large-scale trafficking network that moved hundreds of kilograms of cocaine from Colombia through Mexico and Southern California into the U.S. and Canada, working in coordination with Mexico’s Sinaloa cartel. Authorities accused him of ordering the murder of a cooperating witness in Colombia in January last year and directing retaliatory shootings in Canada linked to stolen drug shipments.

Department Treasury officials have previously described cryptocurrency as a core financial tool for the operation. In November, the Treasury sanctioned Wedding and associated entities, alleging they used crypto to launder proceeds across multiple blockchains, including bitcoin, ethereum, tron, solana and BNB Chain.

The U.S. Securities and Exchange Commission dismissed a civil enforcement action against Gemini Trust Company over the Gemini Earn crypto lending program, ending a closely watched case tied to the 2022 crypto market collapse. The SEC filed Friday a joint stipulation to dismiss the case with prejudice in Manhattan federal court, preventing the agency from bringing the same claims again.

The regulator said its decision hinged on the full recovery of Gemini Earn customers. Through Genesis Global Capital’s bankruptcy proceedings in mid-2024, investors received a 100% return of their crypto assets in kind. The SEC said that outcome, along with prior state and regulatory settlements involving Gemini, justified ending the case.

The SEC sued Gemini and its lending partner Genesis in January 2023, alleging that Gemini Earn was an unregistered securities offering. The program launched in 2021 and promised yields of up to 7.4%, but froze in November 2022 when Genesis halted withdrawals, trapping roughly $940 million belonging to about 340,000 users. A judge allowed the case to proceed in March 2024, finding the SEC had plausibly alleged violations.

Investor recovery followed a series of settlements, including a $21 million SEC penalty paid by Genesis and payments by Gemini to regulators and the bankruptcy estate. The dismissal reflects a broader pullback in crypto enforcement under SEC Chairman Paul Atkins, though the agency said the decision does not set precedent for other cases.

Decentralized exchange aggregator Matcha Meta said a smart contract exploit in SwapNet affected a limited number of users, resulting in confirmed losses of about $13.4 million. The incident impacted users who had disabled Matcha Meta’s default One-Time Approval setting and instead granted direct token allowances to SwapNet’s contracts.

In a post-mortem, Matcha Meta said 20 users were affected, including one user who lost roughly $13.34 million.

The company attributed the losses to vulnerabilities in SwapNet’s smart contracts. Blockchain security firm CertiK previously estimated losses of about $13.3 million, citing a likely arbitrary call vulnerability that enabled unauthorized transfers of approved funds. PeckShield initially placed losses as high as $16.8 million, but Matcha Meta said that figure incorrectly included an unrelated $3.4 million incident involving Aperture Finance.

On-chain data showed the attacker swapping assets on Base before bridging the funds to ethereum. SwapNet paused its Base contracts about 45 minutes after the exploit and later disabled contracts on other networks.

Matcha Meta said it has removed SwapNet as an aggregator, prevented users from disabling One-Time Approval and added new safeguards.

A federal judge in Los Angeles sentenced Jingliang Su, a 45-year-old Chinese national, to nearly four years in prison for his role in laundering close to $37 million in illicit digital asset proceeds tied to a global crypto fraud scheme.

U.S. District for the District of Central California Judge R. Gary Klausner imposed the sentence and ordered Su to pay more than $26 million in restitution. Prosecutors said Su helped move funds stolen from victims in the U.S. through shell companies, crypto wallets and international bank accounts.

The scheme targeted victims through text messages, phone calls and online dating platforms, luring them with fake cryptocurrency investment opportunities. Victims were directed to fraudulent websites designed to mimic legitimate trading platforms and were falsely shown fabricated gains while their money was siphoned off.

Prosecutors said more than $36.9 million flowed into an account at Deltec Bank in the Bahamas before being converted into the stablecoin tether. Co-conspirators in Cambodia transferred the USDT to leaders of scam centers operating across the region. Authorities identified 174 U.S.-based victims.

Su pleaded guilty in June to conspiracy to operate an illegal money transmitting business. Eight defendants have pleaded guilty so far, including a California man who received a sentence of more than four years.