Court-Recognized Reason for WEMIX Delisting: "Exceeding Planned Circulation"

Officials from the victim council of the WEMIX incident held a press conference in front of Upbit in Gangnam-gu, Seoul, on the afternoon of the 2nd, shouting slogans condemning the Digital Asset Exchange Joint Council (DAXA), which decided to end trading support (delisting) for the cryptocurrency WEMIX created by Wemade.
[Image source=Yonhap News]

[Asia Economy Reporter Kim Daehyun] A court ruling has upheld the termination of trading support (delisting) for 'WEMIX,' which circulated a larger amount of virtual assets than initially announced to the exchanges. This ruling is expected to influence similar future cases regarding virtual asset trading support.

According to the court on the 8th, the Seoul Central District Court Civil Division 50 (Chief Presiding Judge Song Kyunggeun) dismissed the provisional injunction filed by WEMIX Limited Liability Company against the digital asset exchange consortium (DAXA) member exchanges Upbit, Bithumb, Coinone, and Korbit, which sought to suspend the decision to terminate trading support. The court judged that the issuance company Wemade's distribution of more WEMIX than originally notified to the exchanges was a valid reason for delisting.

First, the court stated, "It is difficult to assume the concept of intrinsic value corresponding to stocks for virtual assets, making it very challenging to objectively evaluate their value," and defined 'circulation volume' as very important information for investors' judgment. This is because the price of virtual assets inevitably depends heavily on the principles of supply and demand.

Furthermore, the court said, "Issuers can earn significant profits by circulating virtual assets beyond the planned circulation volume at market prices without paying any additional consideration, while investors suffer unpredictable losses such as price declines," and added, "Exchanges have no choice but to check the circulation volume based on the information submitted by issuers, and if problems are found during this process, it is necessary to request explanations from the virtual asset issuers and take timely and appropriate measures from the public interest perspective of 'investor protection.'"

The court judged that a total of approximately 37 million additional WEMIX, including those provided as collateral, were circulated. Applying the circulation price at the time of 2,500 KRW, this amounts to 93.4 billion KRW. Wemade opposed counting the amount provided as loan collateral as part of the circulation volume, arguing that "there was merely a difference in the concept of 'circulation volume' between the issuer and the exchanges," but the court did not accept this argument.

Additionally, the court stated, "Unless there are special circumstances such as arbitrariness or improper motives or purposes in the exchanges' decisions on whether to maintain trading support, such decisions should be respected," and added, "Although it is fully expected that investors will inevitably suffer losses if delisting is executed, WEMIX itself does not disappear due to delisting nor does its value or usability change, and it remains tradable and exchangeable through overseas exchanges."

Earlier, on the 24th of last month, DAXA decided to delist WEMIX due to a significant violation of circulation volume, insufficient or incorrect information provided to investors, errors in materials submitted during the explanation period, and damage to trust. Wemade had announced in the plan submitted to the exchanges that it would circulate about 240 million WEMIX, but investigations revealed that an additional 35 million were circulated, including those provided as loan collateral.

However, despite the dismissal of the provisional injunction, Wemade has stated its intention to proceed with the main lawsuit and file a complaint with the Fair Trade Commission, so the dispute is expected to continue.