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Wemade Faces Investigation Over Alleged Reporting Violations

Investigation Unfolds: South Korean Web3 game developer Wemade has come under scrutiny as local prosecutors launch an investigation into potential breaches of reporting obligations.

Allegations and Focus of Investigation: Reports suggest that Wemade is being investigated for allegedly profiting unfairly by possibly bypassing regulations mandating registration for virtual asset service providers. South Korean laws dictate that crypto platforms must register and report their operations, excluding those that do not control user assets through private keys.

Focus Areas: Prosecutors are examining whether Wemade’s decentralized exchange (DEX) PNIX and Play Wallet digital asset storage system have been concealing private keys from users. While Wemade initially emerged as a game developer, it later ventured into issuing its own tokens, WEMIX, and establishing a main blockchain network, prompting arguments against the necessity of compliance with reporting requirements.

Wemade’s Response: The Wemade team has refuted the allegations, asserting that PNIX DEX and Play Wallet services are not subject to compliance mandates. They argue that since their involvement in asset custody or operation within the wallet is technically restricted, these services are not within the purview of reporting obligations for virtual asset business operators.

Background Context: Last June, the 1st Financial Crimes Investigation Department of the Seoul South District Prosecutor’s Office initiated a comprehensive operation against Wemade following complaints from investors alleging fraud and breaches of capital markets laws. These complaints stemmed from concerns of fraud and misappropriation of funds by the company, as reported by defrauded investors.

Conclusion: As the investigation unfolds, the outcome will shed light on the extent of compliance adherence by Wemade and the implications for its operations in the crypto space. Authorities continue to probe into potential regulatory violations to ensure transparency and accountability within the virtual asset service provider landscape.

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