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    CEO of China’s Top Video Game Streaming Firm Held in Gambling Probe

    While police stated that Chen Shaojie, CEO of Douyu, was arrested on charges of opening a casino, the US-listed company warned investors of the potential fallout.

    Weeks after reports surfaced of his “disappearance,” Douyu, China’s top video game livestreaming platform, has confirmed that CEO Chen Shaojie has been arrested on charges of gambling, an activity prohibited in the mainland.

    A day after the company’s announcement, the Dujiangyan Public Security Bureau in the southwestern Sichuan province stated Wednesday they had arrested a 39-year-old man surnamed Chen on charges of operating a casino on Nov. 16. Officials said investigations were ongoing. 

    The Wuhan-based Douyu, which is backed by Chinese tech giant Tencent and listed on the Nasdaq, is the country’s top game livestreaming platform and also hosts other streaming content related to entertainment, sports, and variety shows. It was founded in 2014 and spun off from AcFun, a video platform similar to Bilibili, in 2010. 

    While Douyu stated that the company is maintaining normal business operations while ensuring it complies with regulatory requirements, it also warned investors that Chen’s arrest and subsequent legal proceedings might impact its “reputation, business, and operation results.” On Thursday, Douyu did not respond to Sixth Tone’s request for further comment.

    As of Wednesday, the US-listed company’s stock price dropped by 5.93% and closed at $0.91, less than one-tenth of its initial public offering of nearly $11 in 2019. As of March 31, 2022, Tencent owned 37.7% of Douyu’s stake, while Chen had 17%. 

    According to the Shanghai-based news outlet The Paper, speculation surrounding Chen’s disappearance began in October when several sources confirmed that his last public appearance was during a conference call after Douyu’s second-quarter financial report on Aug. 14.

    In that meeting, Chen stated that he would continue to build a healthy and sustainable gaming community ecosystem for Douyu, while implementing a “game-centered diversified content ecosystem.” 

    In recent years, Douyu has faced increasing challenges as other short video platforms like Douyin, the Chinese version of TikTok, and Kuaishou have expanded. According to Douyu’s annual financial reports between 2020 and 2022, the company’s revenue declined, dropping from 9.6 billion yuan to 7.1 billion yuan ($1.3 billion to $996 million).

    In October, the company stated that the closing bid price of its American Depositary Shares had remained below the minimum bid price of $1 for the preceding 30 consecutive trading days. If the stock price does not recover to above $1 by April 2024, the company may face the possibility of delisting.

    This year, China has undertaken a series of initiatives aimed at tightening regulations on online content. Douyu has emerged as a prominent target of these efforts. 

    In two separate regulatory actions focused on curbing illegal and pornographic content online, Douyu stands out as the sole company specifically named on two occasions for disseminating pornography and vulgar material and facilitating gambling activities​​​​.

    In May, the Cyberspace Administration of China issued an order mandating a one-month period of concentrated rectification and supervision for the platform.

    You Yunting, a senior partner at Shanghai DeBund Law Offices, told domestic media Yicai that Chen’s arrest indicates that the platform not only failed to comply with its supervision responsibilities, but also engaged in illegal activities. “This may be related to intense external competition, the slowdown or even negative growth of the industry, and the pressure of internal performance evaluations,” he said. 

    Editor: Apurva. 

    (Header image: Chen Shaojie, CEO of Douyu, China’s top video game livestreaming platform. IC)