Wemade: (Re)Establishing Trust in Blockchain Games (A)

This case explores the fundamental challenges and accounting issues arising from the integration of blockchain technology into traditional business models. It features Wemade, a South Korean online gaming company that has staked its future on blockchain-based games. These games are designed for players to explicitly earn cryptocurrency rewards, which can be converted into cash or in-game non-fungible tokens. At the heart of this venture is the exploration of trust—a critical element that blockchain technology promises to enhance through transparency, security, and decentralization. The launch of the MIR4 Global game on WEMIX, Wemade’s blockchain platform, turned the company from a minor force into a pioneer; within a few months of its release, the company’s market capitalization rose tenfold. However, operating in a developing regulatory environment, Wemade suffered a series of scandals that resulted in the undoing of almost all of its growth the following year: it failed to disclose that it had sold its WEMIX cryptocurrency to fund an ambitious mergers and acquisitions strategy; it misclassified WEMIX coin liquidation proceeds as revenue, leading to a restatement; and every major South Korean crypto exchange delisted its WEMIX coin, claiming inadequate disclosures about the coin by the company. How could Wemade’s chief executive, Chang Hyun-Guk, rebuild the trust that was lost? What lessons should he take away about the benefits and challenges of introducing blockchain technology and crypto to the business?