Wemade's cryptocurrency 'WEMIX' is embroiled in controversy following the confirmation of its second delisting decision. Wemade has opposed the delisting decision and warned of legal battles against the Digital Asset Exchange Alliance (DAXA). Industry insiders believe that the likelihood of Wemade's request for a stay being granted is low. Some criticize this response as an attempt to evade responsibility.
◇ Wemade raises a stay request... low chances of being granted
According to industry sources, on the 12th, Wemade filed for a stay of termination of transaction support against four exchanges (Bithumb, Coinone, Korbit, and GOPAX) under DAXA at the Seoul Central District Court on the 9th. Wemade CEO Park Kwan-ho stated in a letter to shareholders on the 6th, "Domestic exchanges are asserting arbitrary and unilateral collusion results by putting forward DAXA, a private group with no legal authority or substance, as a basis for their actions," and added, "The one-sided decision-making process and non-disclosure criteria undermine market trust, and the damage is fully passed on to investors."
DAXA made the decision to delist WEMIX on the 2nd. This is the first time for a delisting in the domestic virtual asset industry. The delisting decision stems from a massive hacking incident that occurred on February 28. On March 4, Wemade announced on its website that "approximately 8.65 million WEMIX coins, worth about 9 billion won, were irregularly withdrawn due to an external attack on Play Bridge Vault." In response, DAXA designated WEMIX as a watch-listed item in March and April, requesting evidence materials. However, concluding that the resolution of reliability and security issues was insufficient, DAXA ultimately decided to delist.
Industry insiders believe it is highly unlikely that Wemade's petition will be granted. This is because the court recognizes DAXA's function as a private self-regulatory body and has determined that the exchanges' decision to delist does not constitute collusion or abuse of authority. DAXA's 'model cases for transaction support' stipulate that if an untraceable hacking incident or security breach occurs in a distributed ledger where issuance, transmission, and storage take place, that asset cannot be considered for transaction support.
In fact, there has been no case in which a virtual currency that was delisted due to past hacking incidents has won in a stay lawsuit. Some, such as Something (SSX) and Galaxia (GXA), filed stay lawsuits after their delisting due to hacking issues, but the court dismissed all of them, recognizing DAXA's reasons for transaction support. When WEMIX faced its first delisting due to allegations of false disclosure of circulation in 2022, the court also recognized DAXA's function and dismissed the stay petition. Given that DAXA's delisting criteria are now clearer than in the past, it appears difficult for Wemade to overturn this decision.
Yang Tae-jung, a lawyer at Kwangya Law Firm, noted, "Currently, there is no separate legal framework underpinning the relationship between DAXA and the issuing company, so the transaction support contract signed between the two institutions becomes the judgment criterion," adding, "Given the contract structure, it is likely that it broadly recognizes DAXA's discretion in delisting, making it hard for Wemade to win this stay lawsuit."
◇ Legal battles as a means of evading responsibility?
Wemade has been dedicated to building the WEMIX ecosystem. Since entering the virtual asset business in 2018, Wemade has introduced the Play-to-Earn (P2E) model through 'Mir 4 Global' and has expanded its ecosystem based on its own mainnet 'WEMIX 3.0' to include non-fungible tokens (NFTs), decentralized finance (DeFi), and decentralized organizations (DAOs). It is considered a leading example of a game-centric blockchain platform in South Korea. However, the visible achievements of WEMIX have been minimal. According to Wemade's Q4 performance last year, blockchain revenue was 997 million won, accounting for only 0.6% of total revenue.
Industry insiders interpret Wemade's warning of legal battles as an attempt to evade responsibility in addition to the business performance of WEMIX. With the trial regarding the 2022 WEMIX circulation manipulation incident, which was the cause of the first delisting decision, still ongoing, Wemade has few alternatives available.
Attorney Yae Ja-sun from Yae Ja-sun Law Office mentioned, "Regarding the previous delisting, former Wemade CEO Jang Hyun-guk was sentenced to five years in prison and fined 200 million won by the prosecution, while Wemade was also fined 500 million won, and civil lawsuits by investors are ongoing," adding, "It seems that the company is trying to appeal to investors by taking the approach of filing a stay petition, regardless of the outcome, in a bid to show that it is doing its best and feels wronged concerning the delisting."
A cryptocurrency expert, who requested anonymity, stated, "From CEO Park Kwan-ho's perspective, he needs to act in the investors’ interests, but as of now, the primary means is the stay petition. If the company admits wrongdoing, he could be prosecuted, thus he tries to shift the blame to DAXA," adding, "This reflects a chronic issue in the cryptocurrency industry where evading responsibility has been common." Park Kwan-ho holds 39.33% of Wemade's shares as of the end of last year.
Following the delisting decision, WEMIX prices are fluctuating. According to cryptocurrency market data provider CoinMarketCap, WEMIX, which was around $0.75 on the 1st, has dropped by 53.3% in a week to trade around $0.35. Given the situation with WEMIX, the prices of virtual currencies issued by other domestic game companies have also fallen correspondingly. In the past week, Netmarble's Marvex (MBX) has decreased from $0.19 to $0.17, NEOWIZ's Neopin (NPT) has fallen from $0.09 to $0.08, and Com2uS Holdings' XPLA has dropped from $0.04 to $0.03.
A Wemade official stated, "Wemade has completed the first buyback of 10 billion won and is currently working on the second buyback of 20 million units," adding, "Moreover, the WEMIX team is making every effort to restore market confidence through dual security checks via an accredited firm from the Korea Internet & Security Agency (KISA)."