Jeff Strain, co-founder of ArenaNet and co-creator of State of Decay, along with his wife Annie Strain, have initiated a $900 million lawsuit against NetEase, the creators of Marvel Rivals. The Strains allege that NetEase's actions led to the devaluation and eventual closure of their studio by spreading fraudulent rumors among investors concerning their latest venture, Prytania Media Group.

The lawsuit, originally filed in January in the civil district court for the parish of Orleans in Louisiana and later transferred to federal court, accuses NetEase of undermining the careers of two seasoned gaming industry professionals and their company. The Strains claim that NetEase's interference was motivated by a desire to sidestep U.S. legal compliance.

According to the Strains' account in the amended complaint, NetEase initially invested in Prytania's subsidiary, Crop Circle Games, acquiring a 25% stake and placing Han Chenglin on the board alongside Jeff and Annie Strain. Initially, the relationship was positive, but tensions arose as NetEase expressed concerns about compliance with U.S. foreign investment laws. The complaint cites an email from NetEase asking the Strains to keep the investment discreet to avoid scrutiny from The Committee on Foreign Investment in the United States (CFIUS), and suggesting the establishment of branches in Canada or Ireland to facilitate NetEase's investments.

The Strains' complaint also delves into NetEase's alleged connections to the Chinese Communist Party (CCP), suggesting a motive to conceal these ties from the U.S. government. They reference Tencent's designation as a "Chinese military company" by the U.S. and reports that NetEase CEO Ding Lei allegedly used the threat of CCP retaliation against Activision Blizzard in 2023.

Further complicating matters, the Strains allege that Ding Lei was in the process of immigrating to the U.S. and purchasing a $29 million Bel-Air mansion from Elon Musk in 2020. They claim Lei was concerned that publicizing NetEase's investments could jeopardize his immigration status.

As the Strains continued to question NetEase about regulatory compliance, their relationship deteriorated. Financial difficulties emerged, and in early February 2024, Crop Circle Games laid off and furloughed staff, leading to internal confusion and anger.

The situation escalated when Jeff Strain received a text from a venture firm's managing director on February 22, alleging fraud and misuse of funds at Crop Circle Games. The Strains traced the rumors back to NetEase, with Han Chenglin admitting in a March board meeting that he was surprised at the company's rapid depletion of funds, which they believe was the source of the rumor.

Following this, other investors withdrew funding from Prytania, and the company struggled to attract new investment. The complaint states that Prytania and its subsidiaries became nearly worthless, down from an estimated value of $344 million, leading to the closure of Crop Circle Games at the end of March.

In April, Annie Strain published a letter on the company website attributing the company's struggles to the industry's economic downturn and difficulty securing funding. She also mentioned a forthcoming Kotaku article that she claimed would have disclosed her personal health issues without her consent. The letter was soon 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 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 asserting their commitment to integrity. They expressed confidence that the legal process would reveal the true reasons behind the demise of the Strains' studios.