South Korean Police Move Seized Crypto to Upbit Custody in Dunamu Deal

South Korea's National Police Agency began transferring cryptocurrency seized in criminal investigations to Dunamu's Upbit Custody service on Monday, ending a decentralized arrangement in which individual investigative units stored assets on their own hardware wallets.

Under the contract, police will hold seized assets in wallets disconnected from the internet. The service will guide officers through transfers based on each asset's technical requirements around the clock, cover all transfer charges, and compensate the agency for 100% of losses involving assets in its custody. Dunamu, the operator of the Upbit exchange, was selected as the final contractor through a public procurement process in August. The contract runs for one year.

The operational shift matters for how seized digital evidence is handled end to end. Assets moved into custody can later be returned to owners, released provisionally, or transferred to prosecutors together with the case file. Before the change, each police unit purchased its own hardware wallets and managed seized funds independently, an approach that produced uneven security practices across the agency.

Why the change came now

The reform follows a costly failure in a 2021 illegal gambling investigation in Gwangju. Police began seizing 1,798.3 Bitcoin (BTC) in that case but ultimately secured only 320.8 BTC after an unidentified party used a recovery phrase — the sequence of words that restores access to a wallet — to move the funds out of police control.

The gap is substantial. Police lost access to roughly 1,477.5 BTC, more than four-fifths of the amount originally seized, because control of private keys was not fully locked down during the seizure window.

What does this change for practitioners?

For investigators, the arrangement removes key management from individual units and concentrates it with a single accountable contractor. Dunamu's obligation to cover transfer charges and 100% of custody losses shifts operational and financial risk away from the police budget and onto the custodian, an unusual allocation for a public procurement contract.

For defense counsel and defendants, the change introduces a formal chain of custody. Assets held offline by a named commercial custodian, with documented transfer procedures and around-the-clock guidance, create a clearer record than unit-level hardware wallets spread across regional offices. That record can matter when seized assets are returned, released provisionally, or forwarded to prosecutors as case evidence.

For exchanges and custodians elsewhere, the contract is a reference point. A national police agency outsourcing seized-asset storage to a private exchange operator, with full loss indemnification, signals how law enforcement in major crypto markets is professionalizing digital asset handling after high-profile key-management failures.

The one-year term means the arrangement faces a renewal decision within roughly twelve months, giving the National Police Agency an early checkpoint to evaluate whether centralized custody reduces the kind of loss recorded in Gwangju.