Jeff Strain and Annie Strain, co-founder and co-creator of ArenaNet and State of Decay respectively, 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 in Louisiana and subsequently moved to federal court, the amended complaint accuses NetEase, a Chinese entity, of intentionally destroying the Strains' careers to avoid U.S. law compliance. The complaint details a complex narrative surrounding Prytania Media's unexpected subsidiary closures. NetEase held a 25% stake in Crop Circle Games, one of Prytania's subsidiaries, with a representative on the board. Initially, the relationship was positive, but NetEase reportedly expressed concerns about complying with U.S. foreign investment laws, even suggesting the Strains maintain a "low profile" to avoid CFIUS regulations and proposing opening branches in 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. It cites Tencent's designation as a "Chinese military company" by the U.S. government and reports of NetEase CEO Ding Lei allegedly using the threat of CCP retaliation against Activision Blizzard in 2023. The Strains also claim Lei, reportedly having purchased a $29 million Bel-Air mansion from Elon Musk in 2020, expressed concern that his U.S. immigration would be jeopardized by publicized investments.
As the Strains questioned NetEase's regulatory compliance, their relationship deteriorated. Crop Circle Games experienced financial difficulties, leading to layoffs and furloughs in early February 2024. The Strains claim that on February 22nd, Jeff Strain received a text from a venture firm managing director alleging Crop Circle Games was accused of fraud—a rumor the Strains traced back to NetEase. In a March board meeting, NetEase's representative reportedly admitted to making a comment that contributed to the rumor.
Following these allegations, investors withdrew funding from Prytania, and the company failed to secure new investment. Prytania Media and its subsidiaries plummeted in value, from an estimated $344 million to near-worthlessness. Crop Circle Games closed in March 2024. In April, Annie Strain published a letter on the company website attributing the company's struggles to the economic downturn and funding difficulties, also mentioning an alleged, unpublished Kotaku article. This letter was subsequently removed. Possibility Space, another Prytania subsidiary, closed a week later.
Jeff and Annie Strain, along with Prytania Media, are suing NetEase for defamation, unfair trade practices, tortious interference, and negligence, seeking damages exceeding $900 million—triple their company's previous valuation. NetEase denies the allegations, stating they are without merit and will vigorously defend themselves.
