[Invest&Law] Wemade vs Employee 'Wemix Coin' Payment Lawsuit First Preparation Hearing Next Month

"Promised WEMIX Coin Payment" Claim
... Former CEO Jang Hyun-guk's Criminal Trial Also Underway

Former and current executives of Wemade have filed a lawsuit against the company demanding the virtual asset WEMIX, which was promised to be paid, with damages amounting to approximately 16 billion KRW. The trial procedure is set to begin next month.

According to the legal community on the 4th, the Seoul Central District Court Civil Division 42 (Presiding Judge Jung Hyun-seok) recently scheduled the preparatory hearing for the damages lawsuit filed by 27 former and current Wemade executives, including Mr. Kwon, against Wemade for July 7. The preparatory hearing is a procedure where representatives organize key issues in advance and plan necessary evidence and witness examinations to ensure the smooth progress of the trial.

Mr. Kwon and others are former and current employees of Wemade Tree, a subsidiary. Wemade Tree was established in 2018 when Wemade started its blockchain business. It led the issuance of WEMIX and the listing on cryptocurrency exchanges in 2020 and was merged into Wemade headquarters in February 2022.

They filed the lawsuit last July on the grounds that "Wemade promised to pay the virtual asset WEMIX as the team’s share for Wemade Tree but failed to fulfill this promise." The total claim amount is 16.17648 billion KRW, which is about 4% of Wemade’s equity capital. Before the trial, Mr. Kwon and others appointed lawyers from the law firm Bae, Kim & Lee LLC, while Wemade appointed lawyers from Kim & Chang law firm, preparing for the case. In the upcoming trial, the legal validity of the payment promise claimed by Mr. Kwon’s side and the calculation of damages based on fluctuations in the virtual asset’s price are expected to be key issues.

Meanwhile, the criminal trial of former Wemade CEO Jang Hyun-guk, who was indicted without detention in August on charges of manipulating WEMIX circulation volume, is currently underway following its first hearing in September. This case is being heard by the Seoul Southern District Court Criminal Division 13 (Presiding Judge Kim Sang-yeon). Jang is accused of falsely announcing the suspension of WEMIX coin liquidity in January and February 2022, gaining huge profits by preventing the drop in Wemade’s stock price and WEMIX coin market price.

Currently, Jang’s side denies the charges. During the trial, Jang’s defense argued, "The premise that it influenced the market price is incorrect, and even if it did, there is no causal relationship to the claim that it manipulated Wemade’s stock price by affecting the market price," adding, "This does not constitute socially unfair trading or market manipulation regulated by the Capital Markets Act." The criminal trial is expected to focus on whether Jang falsely announced the suspension of WEMIX liquidity to prevent further declines in the coin and stock prices.

Due to the realization of successive judicial risks, the trading price of WEMIX has continued to decline. WEMIX was delisted from Korean won trading exchanges because its circulation volume differed from the plan submitted to the Digital Asset Exchange Association (DAXA), a consortium of Korean won market exchanges, in December 2022, and because clear information was not provided to investors. It was later relisted on exchanges except Upbit last year. According to the virtual asset market data provider CoinMarketCap, WEMIX was traded at $1.26 during the previous day’s session, far below the $3.88 recorded on December 8 last year.