“Prytania Media Files Defamation Lawsuit Against NetEase, Citing Studio Downfall”

Reported by Sever Circle Games/Prytania Media.

Prytania Media—the parent company of the now-defunct game studios Sever Circle Games, Chance House, and Fang & Claw founded by Jeff & Annie Strain—is taking legal action against former investor NetEase for defamation. The lawsuit—lodged on January 3, 2025—demands $400 million in compensation and accuses NetEase executives of allegedly divulging sensitive financial information to other parties, ostensibly in retaliation for the Strains’ attempts to help the Chinese conglomerate navigate U.S. regulations.

The lawsuit—which NetEase has already begun contesting with a motion to transfer the case to federal court outside Louisiana—brings new scrutiny to the surprising decline of Prytania Media in 2023. At that time, Jeff and Annie Strain attributed the failure of their studios to allegations that their employees had been leaking confidential information to the media. Now, they assert that NetEase’s purported mishandling of sensitive financial data played a crucial role.

NetEase refutes these accusations. “The claims made by Prytania Media and its founders Annie and Jeff Strain are entirely baseless, and we strongly deny them and will vigorously defend ourselves,” a spokesperson stated in a comment to Game Developer. “Our reputation as a global gaming company is well-established, and we are dedicated to conducting business with honesty.”

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“We are confident that the legal proceedings will affirm our stance and reveal the true reasons behind the closure of the Strains’ studios.”

According to a copy of the lawsuit obtained by Game Developer, the Strains’ attempts to comply with Committee on Foreign Investment regulations commenced shortly after NetEase invested $20 million in Sever Circle Games, acquiring a 20 percent equity stake in the studio for the Marvel Rivals publisher. The lawsuit states that the couple faced resistance from former NetEase executive and Sever Circle board member Han Chenglin, who at one point emailed the plaintiffs about keeping NetEase’s financial involvement discreet to “avoid drawing attention from CFIUS.”

The lawsuit does indicate that “CFIUS reporting is not always mandatory,” but “strongly recommended.”

Months later, on February 23, 2024, Jeff Strain claims he received a text message from Transcend fund managing director Andrew Sheppard, who “informed him that accusations of fraud and financial mismanagement were being made against Crop Circle Games.” Sheppard later “confirmed” to Prytania that NetEase was behind the accusations and that it was looking into claims that “funds had been transferred from Crop Circle Games to other subsidiaries without the necessary consent of relevant stakeholders” and that “quarterly financial statements were potentially materially inaccurate.”

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This occurred just weeks after Sever Circle Games began laying off employees. NetEase also acknowledged that “several key positions had been terminated” following “the potential leak” of—according to the lawsuit—”the aforementioned inaccurate information.”

The Strains assert that these statements made by NetEase were “false and defamatory.”

NetEase accuses the Strains of unusual legal maneuvers

NetEase’s initial reaction to the lawsuit has been to quickly request the removal of the case from the civil district court of Louisiana to federal court. One primary reason for this removal, they argue, is that the Strains have included Sever Circle Games—a company they still effectively control—as part of the list of defendants.

On January 3, 2025, Jeff and Annie Strain stepped down from their positions on the Sever Circle Games board, coinciding with the filing of their lawsuit. Their lawsuit identifies Sever Circle Games as a defendant, along with board member Han Chinlang.

“Plaintiffs claim that Defendant Han defamed them in such a way that rendered Plaintiffs’ businesses unattractive to potential investors, resulting in their downfall. Plaintiffs allege that Mr. Han ruined Crop Circle’s business, and through Crop Circle, Plaintiffs’ other enterprises, even though Mr. Han is part of Crop Circle’s board and NetEase has invested a significant amount of money in Crop Circle. Plaintiffs argue that NetEase and Crop Circle should bear vicarious liability for Defendant Han’s alleged remarks,” NetEase’s filing asserts, contending that the Strains improperly included Sever Circle as a defendant.

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“Plaintiffs do not actually assert any wrongful conduct by Crop Circle. Rather, Plaintiffs’ sole basis for relief against Crop Circle is that: (1) Mr. Han allegedly made defamatory statements about Plaintiffs; (2) Mr. Han sits on Crop Circle’s board of directors; and therefore (3) Crop Circle is liable for anything Mr. Han might have said under the principles of vicarious liability.”

“Not only do Plaintiffs fail to allege any reported misconduct by Crop Circle…throughout the Petition Plaintiffs assert the opposite—that Crop Circle was a victim of the alleged defamation,” the filing continues. “Plaintiffs’ depiction of Crop Circle as a genuine victim of the alleged wrongdoing