South Korean gaming giant Wemade faces legal challenges over alleged regulatory non-compliance in its crypto operations.

The Heart of the Matter

Wemade, a prominent South Korean developer in the Web3 gaming space, is currently under the microscope of local authorities. Reports from within the country suggest that the company may have skirted mandatory registration processes designed for virtual asset service providers.

Regulatory Requirements in South Korea

In South Korea, crypto service platforms are obligated to register and provide regular reports unless they offer users full control over their assets via private keys. The current investigation is probing whether Wemade’s associated decentralized exchange (DEX) PNIX and its Play Wallet did not disclose private keys to users, thereby potentially breaching the law.

Wemade’s Expansion and Response

Initially a gaming studio, Wemade expanded its business to include the issuance of its own cryptocurrency, WEMIX, and the launch of a blockchain network. The company contends that these expansions exempt it from the reporting duties in question. In response to the allegations, Wemade has stated that its PNIX DEX and Play Wallet services are not subject to the compliance requirements, with the team emphasizing the technical barriers that prevent them from accessing or managing the assets held in the wallets.

Previous Legal Entanglements

Last June, the 1st Financial Crimes Investigation Department of the Seoul South District Prosecutor’s Office initiated a comprehensive operation targeting Wemade. The operation was spurred by suspicions of fraudulent activities and violations of capital markets law, following a string of investor complaints accusing Wemade of deception and misappropriation of funds.

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