Jeff Strain and Annie Strain, co-founders of ArenaNet and co-creator of State of Decay, are suing NetEase, the creator of Marvel Rivals, for $900 million. Their lawsuit alleges NetEase deliberately devalued and ultimately caused the closure of their studio, Prytania Media Group, by spreading false rumors of fraud to investors.
Filed initially in Louisiana state court and subsequently moved to federal court, the amended complaint asserts NetEase's actions were intended to circumvent U.S. law. The Strains' account details a complex series of events leading to Prytania's collapse. NetEase invested 25% in Crop Circle Games, a Prytania subsidiary, placing a representative on the board. Initially positive, the relationship soured as NetEase reportedly expressed concerns about U.S. foreign investment regulations, suggesting the Strains maintain a "low profile" to avoid CFIUS scrutiny and even proposing relocating operations to Canada or Ireland to facilitate investment.
The complaint highlights NetEase's alleged ties to the Chinese Communist Party (CCP), suggesting a motive to conceal these connections from the U.S. government. This is supported by citing the U.S. government's designation of Tencent as a "Chinese military company" and reports of NetEase CEO Ding Lei allegedly leveraging CCP retaliation threats against Activision Blizzard in 2023. The Strains also claim Lei, reportedly having purchased a Bel-Air mansion from Elon Musk, expressed concerns about his U.S. immigration status being jeopardized by publicized NetEase investments.
As regulatory compliance questions persisted, the relationship deteriorated. Crop Circle Games experienced financial difficulties, leading to layoffs and furloughs in February 2024. The Strains allege that a text message from a venture capitalist, claiming NetEase had spread rumors of fraud, triggered a chain reaction. A board meeting revealed NetEase's representative had indeed expressed surprise at Crop Circle Games' rapid depletion of funds, corroborating the rumor's origin.
Following these allegations, investor confidence plummeted, leading to the devaluation and eventual closure of Prytania and its subsidiaries. While Annie Strain initially attributed the failure to economic downturn and funding issues in a since-removed online statement, this account omitted mention of NetEase and the fraud allegations.
The Strains are suing NetEase for defamation, unfair trade practices, tortious interference, and negligence, seeking damages exceeding $900 million—triple Prytania's previous valuation. NetEase has issued a statement denying the allegations and vowing a vigorous defense.
