[Invest&Law] Wemade Jang Hyun-guk Trial, Turning Point in Virtual Asset Management Methods

First Trial on June 24 for WEMIX Circulation Manipulation Allegations
Key Issues: False Securitization Notices and Legality of Financial Techniques

The first trial of Vice Chairman Jang Hyun-guk, who was indicted without detention on suspicion of manipulating the circulation volume of Wemade's cryptocurrency 'Wemix,' will be held at the end of this month. This trial is likely to set an important legal precedent regarding how virtual assets based on blockchain technology should be managed and disclosed to investors. In particular, whether Wemade deliberately manipulated the market in relation to the liquidity of Wemix coins is expected to be a key issue.

According to industry sources on the 10th, the first trial of Vice Chairman Jang and the Wemade corporation, who are charged with violating the Capital Markets Act, will take place at the Seoul Southern District Court on the morning of the 24th.

Previously, the prosecution indicted Jang without detention, claiming that from January to February 2022, he falsely announced the suspension of Wemix coin liquidity, then profited through Wemade's stock price gains and preventing the decline of Wemix coin prices.

Jang Hyun-guk, CEO of Wemade, is being interviewed on the 3rd at Wemade headquarters in Seongnam, Gyeonggi Province. / Seongnam = Photo by Kang Jin-hyung aymsdream@

The biggest issue in this trial is expected to be whether Wemade intentionally manipulated the actual circulation volume of Wemix coins. The prosecution argues that Wemade announced a lower circulation volume to artificially raise the value of Wemix and mislead investors. Wemade secured approximately 290 billion KRW through coin liquidity since 2020 and used it for acquisitions of other gaming companies. The prosecution views the discrepancy in actual circulation volume during this process as problematic, asserting that accurate information was not provided to investors.

The question of false announcements is also a point of contention. Vice Chairman Jang announced the suspension of additional Wemix liquidity, but the prosecution claims that from February to October 2022, he continued to covertly liquidate about 300 billion KRW worth of Wemix coins. The prosecution considers this an intentional and secretive act and raises suspicions that the false announcement was intended to stabilize the market. Since this announcement likely had a significant impact on investors, the intentionality of the false notice and whether it caused market disruption will be important points of discussion in the trial.

The legality of the financial techniques used during the Wemix liquidity process is also subject to dispute. The prosecution alleges that Vice Chairman Jang secretly raised funds by investing Wemix coins into funds and then redeeming them as stablecoins (Tether·USDT), or by borrowing stablecoins using Wemix coins as collateral. Wemade counters that these techniques are widely used legitimate financial methods in the blockchain industry, but how the court will evaluate this remains to be seen. Whether these methods are considered standard asset management strategies or illegal asset concealment acts will be a crucial variable in this trial.

This trial will be a significant test not only for Wemade and Vice Chairman Jang but also may have a major impact on the development direction and regulatory policies of the virtual asset market. An industry insider stated, "The core issue of this trial goes beyond simple liquidity; it concerns the transparency of Wemix coin management and circulation volume announcements, as well as the reliability of information provided to investors." They added, "How Vice Chairman Jang and Wemade explain these financial activities and how the court judges them will have a substantial influence on the overall virtual asset market."