Jeff Strain, co-founder of ArenaNet and co-creator of State of Decay, along with his wife Annie Strain, are suing Marvel Rivals creator NetEase for $900 million, alleging that NetEase caused the devaluing and ultimate closure of their studio by spreading rumors among investors that the Strains had committed fraud with their most recent venture, Prytania Media Group.
In a case filed in January in the civil district court for the parish of Orleans in Louisiana and since moved to federal court, the amended complaint seen by IGN opens with a hefty accusation: “This case is about the destruction of the careers of two gaming industry veterans and their company by a Chinese entity seeking to avoid compliance with United States law.”
The story told by the Strains in the complaint is a complex one that does not fully fill in the many questions left last year when Prytania Media’s subsidiaries unexpectedly shut down, one by one. Per their account, NetEase invested early in one of Prytania’s subsidiaries, Crop Circle Games, taking a 25% share and seating Han Chenglin on the company board, with Jeff and Annie Strain taking the other two positions.
At first, they say, the relationship was a positive one. However over time, they say that NetEase leaders and representatives began to express concern about compliance with U.S. laws regarding foreign investment, including in at least one email asking the Strains to keep their investment “low profile” so as to avoid having to comply with rules laid out by The Committee on Foreign Investment in the United States (CFIUS). The complaint says they were asked to open branches in Canada or Ireland in order to make it easier for NetEase to invest.
A significant portion of the complaint endeavors to outline NetEase’s alleged ties to the Chinese Community Party, suggesting NetEase wanted to keep those connections confidential from the United States government, and citing both Tencent’s declaration as a “Chinese military company” by the U.S. government earlier this year, and reports that NetEase CEO Ding Lei allegedly used the threat of CCP retaliation against Activision Blizzard back in 2023 in its dealings with the company over licensing.
The pair also claim they were told that Lei was in the process of immigrating to the United States into a $29 million Bel-Air mansion sold to him by Elon Musk in 2020. They say that Lei expressed concern that his immigration would be threatened if NetEase’s investments were publicized.
The Strains say that they continued to ask questions and push the company about regulatory compliance, and over time their relationship with NetEase began to break down. It also seems that the company began to have money troubles at some point during this period, because in early February of 2024, Crop Circle Games laid off some of its staff and furloughed others, and IGN understood at the time from sources close to the studio that internally there was significant confusion, fear, and later anger internally at how the situation was handled.
In the Strains’ complaint, they say that on February 22, Jeff Strain received a text from a managing director of one of the venture firms that invested in Prytania saying that Crop Circle Games was being accused of fraud and misuse of funds. The Strains claim they traced the rumors back to its source, saying that the director claimed he had heard this from NetEase. In a board meeting in March, Han Chenglin admitted that he told his coworkers “I’m really surprised that the company is running out of runway so quickly,” and suggested this was where the rumor had come from.
The Strains allege that following this incident, other investors began to pull funding from Prytania, and the company could not find any new investors to work with. According to the complaint, in the ensuing weeks and months Prytania Media and all its subsidiaries came to be “worth nearly nothing,” having once been estimated to be worth $344 million. Prytania shuttered Crop Circle Games entirely at the end of March last year.
Then, in April, Annie Strain published a lengthy letter on the company website in which she blamed the recent industry economic downturn and inability to find funding for the company’s struggles. She also repeatedly mentioned an alleged article being written by Kotaku reporter Ethan Gach that she claimed would have outed her own personal health struggles without consulting her. The letter was taken down not long after, and Kotaku never published the article in question. However, Prytania subsidiary Possibility Space shuttered a week later, with Jeff Strain blaming employees leaking information to the press for the closure. Neither NetEase, nor allegations of fraud were mentioned at this time.
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 damages in excess of $900 million, triple their company’s prior valuation.
NetEase shared the following statement with Polygon in response to the suit:
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.
Rebekah Valentine is a senior reporter for IGN. You can find her posting on BlueSky @duckvalentine.bsky.social. Got a story tip? Send it to [email protected].
