April 19, 2024
Latest Cryptocurrency News

Wemade Denies Coin Fraud Allegations Amid South Korean Regulatory Probe

South Korean Web3 game developer, Wemade, has vehemently dismissed allegations of coin over-issuance fraud brought forth by the Seoul Southern District Prosecutors’ Office’s first financial investigation department. The accusations stem from suspicions of unfair profits through potential circumvention of regulations governing virtual asset service providers.

In an official statement released on February 8, the Wemade team, responsible for the development of the WEMIX token, clarified the status of its digital asset storage system, Play Wallet, and the affiliated decentralized exchange, PNIX DEX. The announcement asserted that both Play Wallet and PNIX DEX are exempt from compliance requirements mandating registration with authorities for virtual asset service providers.

The ongoing investigation by South Korean prosecutors focuses on whether Wemade violated regulations that mandate registration and reporting for crypto service platforms. Exceptions to this rule exist for platforms without control over user assets via private keys. Wemade, which transitioned from a game developer to issuing its token WEMIX and blockchain mainnet, claims an exemption from reporting requirements based on this criterion.

Prosecutors are also probing whether Wemade’s PNIX decentralized exchange and Play Wallet digital asset storage system retain private keys from users, potentially breaching reporting obligations for platforms not providing users with private keys.

Wemade countered these allegations, stating that all wallet services from the WEMIX team are decentralized, and the team does not control personal encryption keys. Consequently, they argue that they cannot engage in virtual asset transfer, storage, or exchange, and as such, the services do not require reporting by virtual asset business operators.

Regarding the PNIX DEX, the Wemix team emphasized that it functions solely as a platform for posting buy and sell proposals and facilitating transactions. Assets are stored in smart contracts beyond the control of the business operator, leading to virtual assets being exchanged through individual transactions between users.

The Financial Intelligence Unit, overseeing the local financial sector, has reportedly initiated an investigation into Wemade based on similar complaints. The company, known for its popular Legend of Mir series, transitioned into the blockchain space, with Mir 4 released in 2021 being touted as the most successful blockchain game at the time.

On December 22, Wemade’s parent company launched a $100 million Web3 fund in collaboration with Singaporean venture capital fund Whampoa Digital. The fund aims to invest in digital asset projects in the Middle East. Wemade maintains its innocence amidst the investigations, asserting that its operations comply with relevant regulations and legal requirements.

Image by rawpixel.com on Freepik

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