Jeff Strain and his wife Annie Strain, renowned figures in the gaming industry for their roles in co-founding ArenaNet and co-creating State of Decay, have filed a lawsuit against NetEase, the creators of Marvel Rivals. The couple is seeking $900 million in damages, alleging that NetEase's actions led to the devaluation and eventual closure of their studio, Prytania Media Group. The crux of their complaint, filed in January in the civil district court for the parish of Orleans in Louisiana and subsequently moved to federal court, accuses NetEase of spreading damaging rumors about the Strains committing fraud with Prytania Media Group, which they claim directly contributed to their financial downfall.
The Strains' narrative begins with NetEase's early investment in Crop Circle Games, a subsidiary of Prytania Media, where NetEase acquired a 25% stake and placed Han Chenglin on the board alongside Jeff and Annie Strain. Initially, the partnership was described as positive, but tensions arose as NetEase allegedly expressed concerns about compliance with U.S. laws on foreign investment. The complaint details requests from NetEase to keep their investment "low profile" to avoid scrutiny from The Committee on Foreign Investment in the United States (CFIUS), and suggestions to establish branches in Canada or Ireland to facilitate NetEase's investment.
The complaint further delves into NetEase's alleged connections to the Chinese Communist Party (CCP), suggesting a motive to keep these ties hidden from U.S. authorities. It references 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 mention Lei's immigration to the U.S. and his purchase of a $29 million Bel-Air mansion from Elon Musk, noting Lei's concerns about the publicity of NetEase's investments affecting his immigration status.
As the Strains continued to question and push for regulatory compliance, their relationship with NetEase deteriorated. Financial difficulties emerged, leading to layoffs and furloughs at Crop Circle Games in early February 2024. The situation escalated when Jeff Strain received a text from a venture firm's managing director alleging fraud and misuse of funds at Crop Circle Games, which the Strains traced back to NetEase. In a subsequent board meeting, Han Chenglin's comments were cited as the source of the rumors.
Following these allegations, other investors withdrew funding from Prytania, and the company struggled to attract new investment. By the end of March, Crop Circle Games was shut down, and Prytania's value plummeted from an estimated $344 million to nearly nothing. In April, Annie Strain published a letter on the company website attributing the company's struggles to the industry's economic downturn and funding issues, while also mentioning a potential Kotaku article about her personal health struggles. This letter was later removed, and Kotaku did not publish the article. A week later, Prytania subsidiary Possibility Space closed, with Jeff Strain citing employee leaks to the press as the reason, without mentioning NetEase or the fraud allegations.
The Strains are suing NetEase for defamation, unfair trade practices, tortious interference with business relations, and negligence, seeking damages exceeding $900 million, which is triple their company's prior valuation. In response, NetEase issued a statement to Polygon, denying the allegations and expressing confidence that the legal process would vindicate their position and reveal the true reasons behind the Strains' studios' demise.
