Prytania Media Sues NetEase for $400M Over Alleged Defamation

Prytania Media Sues NetEase for Defamation, Blames It for Studio Collapse

A year after its financial downfall, Prytania Media has filed a lawsuit against former investor NetEase, accusing it of defamation. The lawsuit, filed on January 3, 2025, seeks $400 million in damages and alleges that NetEase executives leaked confidential financial information in retaliation for the Strains’ attempts to help the company comply with U.S. regulations.

Prytania Media—founded by Jeff and Annie Strain and parent company of now-defunct studios Crop Circle Games, Possibility Space, and Fang & Claw—claims that NetEase’s actions contributed significantly to its collapse.

The suit alleges that NetEase mishandled sensitive financial information and leaked it to investors, painting a misleading picture of financial instability. The legal battle has already escalated, with NetEase filing a motion to transfer the case from a Louisiana civil court to federal court.

NetEase has denied the allegations, stating, “The claims by Prytania Media and its founders are without merit, and we will vigorously defend ourselves.” The company asserts that its business conduct remains above board and expects the legal process to clear its name.

According to the lawsuit, Prytania’s compliance efforts with the Committee on Foreign Investment in the United States (CFIUS) regulations began soon after NetEase’s $20 million investment in Crop Circle Games. The investment granted NetEase a 20% stake in the studio. However, the lawsuit alleges that former NetEase executive and Crop Circle board member Han Chenglin resisted these efforts. The suit claims Han once emailed the Strains, suggesting they downplay NetEase’s involvement to avoid scrutiny from CFIUS.

While CFIUS reporting is not always mandatory, the lawsuit notes that it is “highly encouraged.”

In February 2024, Jeff Strain reportedly received a message from Transcend fund managing director Andrew Sheppard, informing him that accusations of fraud and fund misuse were being leveled against Crop Circle Games. Sheppard allegedly confirmed that NetEase was the source of these allegations.

The claims suggested that funds had been moved between subsidiaries without stakeholder approval and that financial reports were “potentially materially inaccurate.” This period coincided with Crop Circle Games beginning employee furloughs, further exacerbating its financial struggles. The lawsuit states that these allegations, which the Strains call “false and defamatory,” severely damaged the company’s credibility.

NetEase has responded by requesting the lawsuit be moved to federal court, arguing that the Strains improperly included Crop Circle Games as a defendant.

The timing is also notable: on the same day the lawsuit was filed (January 3, 2025), Jeff and Annie Strain resigned from the Crop Circle Games board. NetEase argues that the lawsuit lacks direct claims against Crop Circle, stating that the Strains’ only argument for implicating the studio is that board member Han Chenglin allegedly made defamatory remarks.

NetEase’s filing asserts, “Plaintiffs fail to allege any wrongful conduct by Crop Circle… Instead, they describe Crop Circle as a victim of the alleged defamation, making it indistinguishable from the plaintiffs themselves.”

This lawsuit represents the latest development in the Prytania Media saga since its April 2024 shutdown. If the case moves forward, it could uncover further details about the company’s internal financial struggles and the extent of NetEase’s involvement.

Game Developer has reached out to legal representatives for the Strains and will provide updates as they become available.

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