Delisting of Wemade's Wemix coins was justified: Court

Wemade shares crashed Thursday after a court sided with crypto exchanges and upheld their delisting of Wemade's Wemix tokens. The exchanges said that Wemade had not properly disclosed the number of tokens outstanding. In its decision, the ...

Prices of cryptocurrencies are shown on an electronic board at Bithumb's customer services center at Seocho District, southern Seoul, on Thursday after a court upheld the delisting of Wemix tokens. [YONHAP]

Wemade shares crashed Thursday after a court sided with crypto exchanges and upheld their delisting of Wemade's Wemix tokens.

The exchanges said that Wemade had not properly disclosed the number of tokens outstanding.

In its decision, the Seoul Central District Court on Wednesday evening dismissed Wemade’s request to cancel the delisting decision made last month by the Digital Asset eXchange Alliance (DAXA), a trade group representing Korea’s five largest crypto exchanges — Upbit, Bithumb, Coinone, Korbit and Gopax — to delist Wemix.

"Crypto assets have no regulator or an absolute means of determining their price like the stock market," the court said. "Therefore the distribution number is crucial because the price is decided as a result of the balance between supply and demand."

Despite the judgement of the courts, the exchanges and investors, the company vowed to continue the fight, unwilling to abandon its crypto-gaming vision.

"We will continue to make efforts to prove the injustice of DAXA's decision," Wemade said in a statement.

Wemade said it will appeal the decision and file a suit. The company will also take the case to the Fair Trade Commission (FTC) accusing crypto exchanges for collusion against smaller companies.

The exchanges stopped trading of Wemix coins on Thursday at 3 p.m. with the court’s blessing. Owners will be able to withdraw their money for a month, but the information page on Wemix has been taken down from crypto exchanges.

“We respect the court’s decision. DAXA will endeavor to keep the market clean and protect investors. Thank you,” DAXA said in a brief press release on Thursday.

Wemix price plummeted to 200 won ($0.15) right before trading was suspended, down 80 percent from the previous day and 98 percent from its peak November last year.

Wemade closed at 30,050 won on Thursday, plummeting by 20 percent that day and 87 percent compared to November last year when the blockchain bubble was at its apex.

Although Wemade is a game publisher, the fall of its crypto is dragging the company down with it because its CEO Chang Hyun-guk had been adamant that Wemix will be the key to the company’s success.

Wemade has been one of the frontrunners in the race for the so-called play-to-win (P2E) games, where users earn real-world money from the in-game items they’ve gained through blockchain technologies.

The company released its first Mir 4 massively multiplayer online roleplaying game (MMORPG) in November 2020 and provided P2E functions globally except in Korea and China, where transferring cash from game to real world is illegal.

The CEO said 100 games will join the Wemix ecosystem by the first quarter of 2023, meaning that at least 100 games will use Wemade’s blockchain technology and provide P2E games.

He also repeatedly assured investors that the company's game businesses will not be affected despite DAXA’s decision, adding that the company is in talks with foreign crypto exchanges to trade Wemix.

Overseas exchanges are being cautious. Bybit, MEXC and Huobi have issued investment warnings, calling Wemix “a blockchain asset with high risk,” and OKX delisted Wemix pairs, prohibiting spot, margin trading, perpetual contracts and Wemix Savings, on Thursday.

Over 90 percent of Wemix tokens were traded on Korean exchange services.

“Foreign exchanges take token management rules very seriously, so it’s likely that being delisted from domestic exchanges will have an effect,” said Jang Gyeong-pil, an analyst at blockchain research center Xangle.

“This may also target other game companies with blockchain services. If coin investors exit the market due to Wemix, then that will also bring down the level of trust in the P2E market.”

BY YOON SO-YEON [yoon.soyeon@joongang.co.kr]