Wemade, a South Korean Web3 company specializing in Web3 games, has refused accusations of fraudulent over-issuance of coins brought forward by the Seoul Southern District Prosecutors’ Office’s financial investigation unit.
In an official statement released on February 8, the team overseeing Wemade’s token WEMIX clarified that their digital asset storage system, Play Wallet, and the affiliated decentralized exchange Phoenix DEX are not subject to regulatory requirements mandating registration with authorities for virtual asset service providers.
Reports indicate that Wemade is currently under scrutiny by South Korean prosecutors, with a focus on suspicions of unfair profits potentially achieved through circumventing regulations that require virtual asset service providers to register with authorities.
According to South Korean regulations, crypto service platforms are required to register and report, unless they do not have control over user assets through private keys.
Prosecutors are also investigating whether Wemade’s Phoenix decentralized exchange and Play Wallet digital asset storage system withhold private keys from users.
Wemade has affirmed that all wallet services provided by the Wemix team operate in a decentralized manner, with no control over users’ encryption keys. This means they cannot initiate virtual asset transfers, nor do they have access to storage or exchange functions.
As it doesn’t have technical involvement in asset custody, it’s deemed a service that does not require reporting by virtual asset business operators. Wemix’s team further said that its dex’s assets are stored in smart contracts beyond Wemix’s control and exchanged via individual transactions between users.
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