Wemade is accused of evading reporting

Acryptoinvest.news: According to South Korean news reports, Wemade, a South Korean Web3 game developer with a market capitalization of 1.6 trillion Korean won ($1.2 billion), is under investigation by local prosecutors.

The investigation is focusing on allegations of unfair profits through potential evasion of rules that require virtual asset service providers to register with authorities, local news outlet Munhwa reported on Thursday.

South Korean regulations require registration and reporting on crypto service platforms, except those that do not share control of users' assets by providing private keys. Wemade, which started out as a game developer but has moved to issuing its own tokens (WEMIX) and a blockchain network, insisted that the company is not subject to reporting requirements.

Prosecutors are reportedly looking into whether the Wemade-linked decentralized exchange PNIX and its digital asset storage system Play Wallet were hiding private keys from users. According to Munhwa, this investigation is aimed at determining whether the PNIX and Play Wallet services are violating the mandate by avoiding the reporting obligations required for platforms that do not provide private keys to users.

The Financial Intelligence Unit, the local financial sector watchdog, also received similar complaints and launched an investigation into Wemade, Munhwa said.

The Wemade WEMIX team responded to the allegations in an official statement on Thursday afternoon in Asia, where they stated that PNIX DEX and Play Wallet services are not subject to compliance requirements.

The statement says that Play Wallet is a decentralized service whose team does not control users' private keys or assets. The team added that PNIX simply provides a decentralized trading platform that processes buy and sell orders, where assets awaiting transactions are stored in smart contracts outside the hands of the operator.