Shares in South Korean blockchain game developer Wemade Co. fell sharply on Thursday after a court dismissed the company’s injunction against four local cryptocurrency exchanges to stop them going ahead with a plan to remove Wemade’s crypto token from their platforms. 

The Seoul Central District Court dismissed the Wemade request on Wednesday to block plans by the Upbit, Bithumb, Coinone and Korbit exchanges to delist the WEMIX token. The four exchanges collectively account for more than 95% of crypto trade volume in the country. 

The four exchanges said they stopped trading in WEMIX at 3 p.m. Korea time on Thursday. The exchanges, which made the decision citing earlier misreported circulation numbers for the token, said they will support the withdrawal of WEMIX tokens by holders until Jan. 5, 2023. 

In more bad news for Wemade, Global cryptocurrency exchange OKX also said Thursday it will delist WEMIX from its platform.

Wemade shares fell 23% to 30,200 Korean won (US$22) in early trading on South Korea’s KOSDAQ market. Just last month, the shares traded at 61,000 won. WEMIX plunged 71% over the last 24 hours to 5 p.m. in Seoul.

WEMIX has so far this year fallen 98% to US$0.2 from US$10 at the start of 2022, while Wemade shares skidded 83% in the same period.

Shares in Wemade’s gaming subsidiaries listed on South Korea’s KOSDAQ exchange also retreated on Thursday, with gaming software maker Wemade Max falling 22% and mobile game maker Wemade Play declining 5%.

The exchanges make up four of only five cryptocurrency exchanges in South Korea that are licensed to provide fiat-to-crypto transactions. Another 31 exchanges are limited to token-to-token trade. 

What happened?

On Nov. 24, the four exchanges – all part of the local industry monitoring group, the Digital Asset eXchange Alliance (DAXA) – said they will delist Wemade’s cryptocurrency. This comes a month after exchanges gave WEMIX an “investment warning,” citing inaccurate reporting of the coin’s circulation figures. 

Wemade provided an estimate to Upbit in January of some 245 million WEMIX tokens in circulation, but it was later revealed that through Oct. 25 the figure was 317 million, or an additional 72 million. 

The game company said it excluded the issuance of WEMIX tokens used to provide liquidity for its blockchain mainnet, deposits in making loans, and managing the ecosystem, arguing that it did not think such uncirculated tokens should be included in the estimate.

Soon after the November delisting announcement, the price of WEMIX plunged more than 70%, and the shares of Wemade and its subsidiaries dropped nearly 30%. 

See related article: S.Korean Wemade’s stock falls 30% after exchanges announce WEMIX token delisting; CEO blames Upbit exchange

Wemade Chief Executive Officer Henry Chang has attacked Upbit for what he called “unfair treatment.”

“When [WEMIX] received the investment warning, we asked Upbit for their standard or guideline for circulation, but to this day have not received anything,” he said, adding that suspending the token without any standard was unreasonable.

Upbit said that misreporting of circulation numbers was not the only reason for the delisting, although it has not provided further details.

Whither Wemade?

Wemade said in a statement Wednesday that the company respects the court decision, adding it is preparing to list WEMIX on other exchanges, including overseas.

The company also said it is talking with Binance Institutional Services to take custody of its WEMIX tokens, and Chang announced that he will commence a quarterly “Ask Me Anything” sessions with the community and investors. 

“The Wemade case is about the token issuer and foundation lacking the management of token distribution and the absence of clear standards, which could lead to investor damage,” said Lee Jang-woo, adjunct professor on global entrepreneurship at Seoul’s Hanyang University, in an interview with Forkast.

Lee, a frequent media commentator on cryptocurrencies, said the developments may be good for the country’s crypto industry.

“I think the market overall now demands higher standards for things that were not considered a huge problem before,” Lee said, adding that markets don’t like uncertainty so the penalty for WEMIX has brought some clarity.

See related article: S.Korea court dismisses Wemade’s injunction, local exchanges to delist WEMIX

Wemade, established in 2000, found success in adopting blockchain technology to its line of video games such as play-to-earn MMORPG game MIR4 Global, which had over 1.4 million concurrent users last year. MIR4 Global allows players to swap in-game earnings into WEMIX tokens.

It launched its latest blockchain mainnet WEMIX 3.0 in October this year, following up with the launch of its stablecoin WEMIX$ and decentralized finance (DeFi) service WEMIX.Fi which allows users to store, swap and stake Wemade’s tokens.

Prior to the delisting of WEMIX, Wemade’s CEO Chang said the company aims to push out a hundred blockchain-based video games by the first quarter of 2023. He hasn’t commented on how those plans may develop with the effective expulsion of its WEMIX token from the South Korean market.