Jeff Strain, co-founder of ArenaNet and co-creator of State of Decay, along with his wife Annie Strain, are suing Marvel Rivals developer NetEase for $900 million. They allege that NetEase caused the devaluation and subsequent closure of their studio by spreading false rumors among investors, claiming the Strains had engaged in fraudulent activities through their latest venture, Prytania Media Group.
Filed in January in the Civil District Court for the Parish of Orleans in Louisiana—later moved to federal court—the amended complaint obtained by IGN begins with a serious allegation: "This case involves the destruction of two gaming industry veterans' careers and their company by a Chinese entity attempting to evade compliance with United States law."
The Strains' complaint outlines a complex narrative that leaves many questions unanswered from last year, when Prytania Media's subsidiaries abruptly shut down one after another. According to their account, NetEase made an early investment in one of Prytania's subsidiaries, Crop Circle Games, acquiring a 25% stake and securing a board seat for Han Chenglin, with Jeff and Annie Strain occupying the other two positions.
Initially, the relationship was reportedly positive. Over time, however, NetEase leadership and representatives allegedly grew concerned about compliance with U.S. foreign investment regulations. In at least one email, they reportedly asked the Strains to keep the investment "low profile" to avoid scrutiny from The Committee on Foreign Investment in the United States (CFIUS). The complaint states they were urged to establish branches in Canada or Ireland to facilitate NetEase's investment.
A substantial part of the complaint details NetEase's alleged connections to the Chinese Communist Party, suggesting the company sought to conceal these ties from the U.S. government. It references both the U.S. government's designation of Tencent as a "Chinese military company" earlier this year and reports that NetEase CEO Ding Lei allegedly threatened Activision Blizzard with CCP retaliation in 2023 during licensing negotiations.
The Strains also claim they were informed that Lei was in the process of immigrating to the United States, purchasing a $29 million Bel-Air mansion from Elon Musk in 2020. They allege Lei expressed concerns that his immigration status would be jeopardized if NetEase's investments became public.
As the Strains continued to raise questions and push for regulatory compliance, their relationship with NetEase reportedly deteriorated. Financial difficulties emerged during this period, leading Crop Circle Games to lay off some staff and furlough others in early February 2024. IGN learned from sources close to the studio that employees experienced significant confusion, fear, and later anger over how the situation was managed.
According to the complaint, on February 22, Jeff Strain received a text from a managing director at one of Prytania's venture capital investors, accusing Crop Circle Games of fraud and misusing funds. The Strains traced the rumors back to NetEase. During a March board meeting, Han Chenglin reportedly admitted telling colleagues, "I'm really surprised that the company is running out of runway so quickly," suggesting this remark may have sparked the rumor.
The Strains allege that following this incident, other investors withdrew funding from Prytania, and the company could not secure new investment partners. The complaint states that within weeks, Prytania Media and its subsidiaries, once valued at $344 million, became "worth nearly nothing." Prytania shut down Crop Circle Games entirely by the end of March last year.
In April, Annie Strain published a lengthy letter on the company website, attributing the company's struggles to the industry's economic downturn and difficulty securing funding. She repeatedly referenced an alleged article by Kotaku reporter Ethan Gach that she claimed would disclose her personal health issues without consent. The letter was soon removed, and Kotaku never published the article. A week later, Prytania subsidiary Possibility Space closed, with Jeff Strain blaming employees for leaking information to the press. At that time, no mention was made of NetEase or fraud allegations.
Jeff Strain, Annie Strain, and Prytania Media are suing NetEase for defamation, unfair trade practices, tortious interference with business relations, and negligence. They are seeking over $900 million in damages, triple their company's previous valuation.
NetEase provided the following statement to Polygon regarding the lawsuit:
The allegations by Prytania Media and its founders Annie and Jeff Strain are wholly without merit, and we emphatically deny and will vigorously defend ourselves against them. Our record as a global gaming company speaks for itself, and we remain committed to conducting business with integrity. We are confident that the legal process will vindicate our position and shed light on the real reasons behind the demise of the Strains’ studios.
