On November 24, the Digital Asset Exchange Joint Consultative Body (DAXA), South Korea’s crypto exchange association, declared the delisting of the WEMIX token. The decision was based on allegations of misinformation provided by Wemade, the token’s issuer, which reportedly misled investors. Consequently, prosecutors have now initiated a compulsory investigation into Wemade, a KOSDAQ-listed company and the issuer of the disputed virtual asset, WEMIX.
Prosecutors Executed A Search And Seizure
According to a local news report, WeMade, a KOSDAQ-listed company and the issuer of the virtual asset WEMIX, is now under a comprehensive forced investigation by prosecutors, which includes seizure and search.
This marks the first instance of such an intensive investigation into WeMade. While a search and seizure related to the WEMIX controversy involving Rep. Kim Nam-guk took place on May 24, it was not specifically targeted at WeMade.
On the morning of June 30, the Seoul Southern District Prosecutor’s Office Financial Investigation Division 1, led by Chief Prosecutor Chae Hee-man, initiated a large-scale search and seizure at the WeMade headquarters in Sampyeong-dong, Bundang-gu, Seongnam-si, Gyeonggi-do. The operation also targeted market makers believed to be involved in WEMIX’s expedient market-making activities.
This action follows a complaint lodged by WEMIX investors against WeMade and its CEO, Jang Hyun-guk, on May 12. The complaint, filed with the Seoul Southern District Prosecutor’s Office, accused them of fraud, embezzlement, and breach of trust, sparking the investigation a month and a half later.
This marks the first compulsory investigation into WeMade, a company that has been embroiled in several controversies since 2021.
Primarily, between November 2020 and January 2022, WEMIX tokens valued at 225.5 billion won were liquidated without informing the users. The funds were then used for mergers and acquisitions with SundayToz, sparking significant controversy.
This action, criticized by experts as a ‘blink sale,’ underscored the urgent need for legislation on the disclosure of virtual assets.
South Korea Tightens Its Grip On Crypto Trading
The issues surrounding Wemix, a digital coin issued by South Korean game developer Wemade last year, served as an alarm bell for both investors and regulators in a digital currency market that, despite being one of the largest globally, is still largely unregulated. Discontent escalated significantly when Wemade exceeded the promised distribution of Wemix in financing the company’s business expansion.
Furthermore, by the end of 2022, the misrepresentation of WEMIX’s distribution volume came to light, leading to legal disputes with exchanges and ultimately resulting in the delisting of WEMIX from major virtual asset exchanges in Korea. The investigation reportedly extends beyond WeMade to include WEMIX market makers as well.
Allegations of breach of trust against CEO Jang Hyun-guk are also under scrutiny. In December 2022, JTBC reported that CEO Jang Hyun-guk had used 12 billion won of company funds to maintain a private residence at Signiel, a high-end residential facility.
Furthermore, the WEMIX Foundation had been in discussions with Binance Custody, Binance’s institutional custody service, to secure and transparently manage Wemade’s native cryptocurrency, WEMIX. However, the deal was not approved.
Wemade’s CEO, Henry Chang, accused Upbit, the country’s largest exchange, of power abuse. Despite this, Chang conceded that his company had indeed misreported circulation data.
