Chinese police arrest tech founder on suspicion of running casino
Stay informed with free updates
Simply sign up to the Chinese business & finance myFT Digest — delivered directly to your inbox.
Chinese police have arrested the founder of Tencent-backed game-streaming site DouYu on suspicion of operating a casino, in a rare case of holding a tech entrepreneur criminally responsible for activity on their company’s media platform.
Police in the small southwestern city of Dujiangyan on Wednesday confirmed they had arrested a 39-year-old man with the surname Chen, a day after DouYu said its chief executive and chair Chen Shaojie had been arrested by police on November 16.
The Financial Times previously reported that Chen had been taken away by the Chinese authorities in October as police probed pornography and gambling on DouYu’s platform. Gambling is illegal on the Chinese mainland.
Since founding DouYu in 2014, Chen has built the company into one of China’s leading game-streaming and esports brands. He has faced challenges more recently, including a failed plan by main backer Tencent to merge the group with rival Huya, and a tough crackdown by Beijing on livestreaming sites.
Chen’s troubles increased after China’s powerful internet watchdog in May dispatched a team of officials to the company’s offices for a month of “intensive rectification and supervision” of “porn and vulgar content” discovered on the platform.
The arrest of another well-known Chinese executive is a setback to the ruling Communist party’s attempts to reassure entrepreneurs and reinvigorate the private sector. Chen’s weeks-long disappearance has already put many in the tech and entertainment industries on edge.
His arrest in Dujiangyan comes after authorities in the city last year arrested and then convicted a livestreaming group called Shanshanjiu Outdoor for running a gambling ring on DouYu’s platform.
According to the Dujiangyan court, users participated in Shanshanjiu’s lotteries by paying for virtual gifts, with lotto winners receiving cash prizes. The court said the group roped in more than 4mn participants who put up Rmb120mn ($17mn) over the course of 4,267 lottery draws.
In 2020, Chinese state media reported on another group called Changsha Countryside Death Squadron, which took in Rmb177mn from running gambling operations on DouYu. DouYu had small stakes in both Shanshanjiu and Changsha Countryside, according to data provider Qichacha.
In a US regulatory filing this year, the company said such activities by the two groups were “explicitly forbidden by our platform” and it had blocked their accounts after becoming aware of the incidents.
“If our platform is deemed to be engaged in or facilitate certain illegal or inappropriate activities, we may . . . even be subject to fines, penalties or criminal or civil liabilities,” it warned.
Xia Hailong, a lawyer at the Shanghai Shenlun firm, said the case would hinge on whether DouYu had knowingly turned a blind eye to livestreaming groups running gambling operations on its platform.
“Chen Shaojie’s arrest implies that the judicial authorities have at least obtained some evidence,” said Xia. “It is bewildering that DouYu, a major domestic livestreaming platform, would be engaged in such risky behaviour.”
DouYu’s New York-traded shares fell 6 per cent on Tuesday, bringing its market value to below $300mn, less than the value of the nearly $900mn in cash and short-term investments on its balance sheet.
The company on Tuesday said the enforcement actions against Chen may have a “material adverse impact on the company’s reputation, business and results of operations”.
Directors and executives will “work on contingency plans in response to Mr Chen’s arrest and related investigations”, the company said. It did not comment on the casino allegations, but added that it had not received any official notice of the investigation against Chen or the reasons for his arrest.
