'Wemix Incident' Prosecution Ends 14-Month Investigation with Weak Indictment

After about 14 months of investigation, the prosecution indicted Jang Hyun-guk, Vice Chairman of Wemade, in connection with the 'WEMIX incident' that erupted in early 2022, but there are criticisms that it is insufficient to resolve the suspicions so far. Vice Chairman Jang avoided charges of fraud despite making a false announcement that he would not sell WEMIX coins. In particular, although suspicions of legislative lobbying were raised after it was revealed that Kim Nam-guk, a member of the Democratic Party of Korea, had invested tens of billions of won in WEMIX, this was completely omitted in the results of this investigation.

According to the legal community on the 8th, Vice Chairman Jang and the Wemade corporation were non-detained indicted on the 5th for violating the Capital Markets Act by manipulating the WEMIX coin price and Wemade stock price. The 'fraud' charge, which has mainly been applied to coin-related crimes, was excluded. This is because it is difficult to see that Vice Chairman Jang directly acquired the purchase funds of investors' coins.

Jang Hyun-guk, Vice Chairman of Wemade (Photo by Wemade)

The WEMIX incident was triggered in January 2022 when Wemade, the issuer, was found to have converted a large amount of WEMIX coins into cash and used them as business funds without prior disclosure. When investors' criticism intensified, Vice Chairman Jang declared a 'suspension of securitization' on January 29 of that year, but between February and October, he additionally converted about 300 billion won worth of WEMIX coins into cash. However, although the prosecution detailed these facts in the indictment, it did not apply criminal charges to the coin transactions themselves. The act of deceiving investors and converting WEMIX coins worth thousands of billions of won into cash is only the main background of the crime; the core of the indictment is that this was used to induce the purchase of Wemade stocks and manage the stock price. This is why the charge of violating the Capital Markets Act was applied.

The prosecution's indictment logic is based on the premise that 'the Wemade stock price and the WEMIX coin price move in fact in tandem.' However, the legal community points out that this is an excessive logical leap. According to Wemade's business report, more than 90% of sales come from games and licenses. The virtual asset business is only a part, and there are many other factors directly affecting the stock price, such as new games and performance. The causal relationship between the false announcement about WEMIX coins and the Wemade stock price is unclear, making it difficult to calculate the amount of unjust profits. In fact, the prosecution marked the profits acquired by CEO Jang as 'amount unknown.' Although suspicions of political lobbying strongly arose as it was known that Representative Kim Nam-guk held tens of billions of won worth of WEMIX coins in early 2022, the related content was not mentioned at all in the announcement of this investigation result.

There are also institutional limitations. Due to the belated legislation of the Act on the Protection of Virtual Asset Users (effective July 19, 2024), it is difficult to apply it to crimes committed before that. A representative of the Seoul Southern District Prosecutors' Office explained, "If the Virtual Asset Act had existed at the time of (Vice Chairman Jang's) criminal acts, it could have been applied, but currently, there is no basis to punish the crimes committed at that time."