Wemade investigated for dodging reporting duties

South Korean Web3 game developer Wemade is under investigation by local prosecutors.

According to local media, the investigation concerns allegations of unfair profits resulting from potential circumvention of rules that require virtual asset service providers to register with authorities.

South Korean regulations require registration and reporting on crypto service platforms, except for those that do not share control over user assets by providing private keys.

Prosecutors are looking into whether the Wemade-linked decentralized exchange (DEX) PNIX and its Play Wallet digital asset storage system were hiding private keys from users. Wemade initially entered the market as a game developer, but moved on to issuing its own tokens WEMIX and the main blockchain network. Therefore, the company argues that it is not required to comply with reporting requirements.

The Wemade team responded to the allegations by noting that PNIX DEX and Play Wallet services are not subject to compliance requirements.

“Naturally, involvement in the custody or operation of assets stored in the wallet is technically blocked, so it is judged that it is not a service subject to reporting by virtual asset business operators.”

Wemade team

Last June, the 1st Financial Crimes Investigation Department of the Seoul South District Prosecutor’s Office launched a large-scale operation against WeMade. The reason for the inspection was suspicion of fraud and violation of the capital markets law. The reason was a series of complaints from defrauded WeMade investors, who accused the company of fraud and misuse of funds.