Would it really be a new year without Runescape developer Jagex being involved in some sort of weird corporate sale only to be blocked by a lawsuit that says, “You can’t sell because you don’t own it?” Well, technically, yes it would be a new year. But it’s hard to feel as if Jagex’s ownership shenanigans are anything but old hat at this point.
I first wrote about Jagex here in Lawful Neutral six months ago when Jagex announced it was being sold to MacArthur Fortune, and a Chinese company, Chinese Menshing Trust (CMT), stepped in to say the sale was illegal because it actually owned Jagex’s parent company, Shanghai Hongtuo Network Technologies (SHNT). The lawsuit was filed in A UK court, and when I wrote the original piece, there was no decision one way or another from the UK courts.
Fast-forward to this week, and history is apparently destined to repeat itself. Jagex claims it’s been sold an American company called The Carlyle Group, while another investment firm named Plutos Sama Holdings (PSH) filed suit, saying that the MacArthur wasn’t the actual owner. And this, is where it gets interesting…again.
While my previous legal spelunking trying to track these Chinese businesses and American investment firms was messy, the lawsuit from PSH was actually very detailed, and the narrative it presented actually fits neatly with everything I’d researched for last year’s column. It provided me a thread to actually follow what has happened in the interim.
I must note that PSH’s claims in the lawsuit are mostly not independently verifiable, being as they are primarily agreements between companies, private documentation, or “sufficient” evidence for them to make a claim. But the story they tell here does make sense with what is publicly known. Let’s dive into the narrative and timeline in the lawsuit, which takes us back a few years.
Way back in the long, long ago
According to the lawsuit, PSH first learned of an opportunity to buy Jagex in late 2018. We know that this fits with the general timeline of a public announcement with the intent to sell in 2019. According to PSH, it intended to bid on the auction of Jagex by purchasing its owner at the time, Shanghai Hongtou Network Technologies (SNHT). PSH asserts that it actually won the action for $500M, later adjusted up to $530M. PSH actually put out an announcement in mid-2019 confirming the sale. I should mentioned that in my initial research, I saw no mention of PSH at all. Out of an abundance of caution, I checked the Wayback Machine to ensure the announcement article was posted and backdated — and low and behold, it was actually crawled for the first time in September 2019.
Another fun tidbit from the announcement is that Platinum Fortune LP is the ultimate “transferee” (owner) and that Platinum Fortune was a Limited Partner while PSH was the general partner. This means that Platinum Fortune was liable only for the amount it invested in the company, while PSH assumed unlimited liability for the company. So Platinum Fortune got all the press as being the buyer here, while PSH actually took on greater risk.
(At the time, there was a lot of speculation around who exactly owned Platinum Fortune LP, with speculation ranging from the Chinese government to Fukong, one of the many parent companies of SHNT. However, all the articles and references I can find refer to Platinum Fortune LP as a MacArthur subsidiary – not Fukong or the Chinese government.)
Then it got weird(er)
PSH says it “started receiving troubling communication from third parties,” who allegedly said that SHNT’s financial troubles (the reason for the sale) were the result of a lending scheme spanning companies in China and the US, which led to several executives literally fleeing China to avoid prosecution. Most of the allegations, according to PSH, revolve around a gentleman named Yan Jinggang, who was had ties to many of the companies involved in the lending schemes.
(At this point, the lawsuit alleges that its limited partner, Platinum Fortune LP, fronted the money to buy SHNT/Jagex with funds stolen from SHNT’s parent company. What I can’t 100% establish is that the Platinum Fortune LP mentioned in the 2019 sale is the same Platinum Fortune LP from the 2020 sale — the one that’s an investment arm of MacArthur Fortune. I only assume they are same company because of what happens next, and it seems a stretch to create a brand-new shell company with the same name as an existing company with the intent to eventually muddy ownership by selling to the other firm with the same name. I made myself dizzy typing that out.)
Anyway, back to our story: PSH says it confirmed Platinum Fortune LP invested using stolen funds and moved to distance itself from that partner. It sold its general partner interest in the limited partnership to MacArthur Fortune Holdings in February 2020. The fact that MacArthur Fortune was the buying company of PSH’s general interest is what makes me think that Platinum Fortune LP is the same company in 2019 and 2020 — but again, I can’t confirm definitively.
Plutos just wanted to love Jagex
At this point, PSH learns that SHNT was heading to judicial auction to capture outstanding debts as a result of two creditors for SHNT: Huarong Trust and Minsheng Trust. The judicial auction was held in March 2020, and PSH says it wasn’t ready to submit a bid, probably still gun-shy from its most recent break just one month before. Fortunately, no one else was keen jump on this particular auction either – no one bid.
PSH, showing how truly devoted it was to snagging Jagex, reached out to the company selling SHNT and offered a private sale. It submitted a formal offer on March 21st, 2020 complete with proof of funds to complete the transaction. Everything seemed great until some “allegations” were made against PSH’s lender, freezing all the lender’s assets and ensuring the sale couldn’t be completed.
So who made the allegations? PSH accuses none other than Yan Jinggang – “or those acting in concert with Yan” – of lodging allegations against the lender, with the specific goal of blocking the sale. Why, you would rightly ask, would Yan want to block the sale? According to the lawsuit, he took a loan of about $150M USD from SHNT, and he was concerned that a sale would mean that the new owners could call in that debt. There’s no way I can independently verify that Yan made the allegations against PSH’s lender or that the move was intended to block the sale or that he owes SHNT $150M USD. But the timing of the allegations is certainly suspicious.
The overall result of that action is that PSH’s direct sale offer didn’t go through, so the Chinese courts moved ahead with a second judicial auction. Again, no one bid on SHNT in this second auction either. As a result, the Chinese Court transferred 100% interest to the two creditors, with Huarong getting 55% interest and Minsheng getting a 45% interest.
Fukong, the old parent company of SHNT, then “sold” SHNT/Jagex to MacArthur in 2020, which we covered, although now it’s much more clear why there was so much confusion over who owned SNHT and Jagex. The PSH lawsuit says that MacArthur “seized control of SHNT and Jagex” and that was what led Huarong and Minsheng Trusts to file suit in the United Kingdom. What we didn’t know back in July is that Huarong and Minsheng were successful, and the UK court put a stop notice out that permanently prevented Platinum Fortune LP/MacArthur from selling any share of Jagex.
The big finale, a love unrequited
PSH really, really wants Jagex. Like, fam, you can’t imagine how bad it wants to own Jagex. So after the UK injunction on the sales of shares, PSH entered into private negotiations with Huarong and Minsheng. Everything seemed to be doing swimmingly until, PSH alleges, Yan Jinggang marched back into the picture and bribed investors in the Minsheng Trust to slow down the sale to allow him time to come up with another option, which they say he did by partnering with the Carlyle Group to express interest in the sale of SHNT and Jagex. According to Chinese law, since there was more than one party interested in the sale, it had to go auction. Again.
Huarong put its 55% interest up for auction, and PSH bid – and in fact, it was the only bidder, and on September 4th, 2020, it says it was presented with the sealed closing documents. Things languished as Huarong and PSH reached a “stalemate,” causing PSH to spend $1M USD on a special negotiator. On November 16th, 2020, PSH claims it reached a new agreement the rest of SHNT. Then, on December 23rd, 2020 the UK court injunction against the sale of Jagex assets “magically disappeared” (seriously, those words are verbatim from the suit), and both Huarong and Minsheng stopped responding to PSH. Then came this week’s announcement that SHNT and Jagex were being sold to The Carlyle Group, which spurred PSH to file the lawsuit.
All this new information really makes the disjointed pieces of the story we already had make much more sense – but it’s still not entirely clear who owns Jagex. PSH says it had an agreement to purchase, and then Carlyle Group swooped in and bought it out from under it – and which agreement is going to be honored in which court is not immediately obvious. And I would call Jagex just a pawn in all this, but that implies some level of autonomy that I’m not sure Jagex has. In truth, we have no idea how much Jagex’s leadership knows or controls at its top levels.
The final piece of this wild story is that there’s the barest suggestion of Yan Jinggang actually being the supervillian PSH makes him out to be. Back in January 2021, the Chairman of the Huarong Trust was sentenced to death (yes, death) in China for accepting the equivalent of $200M in bribes. One of the top examples of his corruption as reported in China? A loan made to SHNT — and our sinister friend Mr. Yan.
Every other week, Andy McAdams braves the swarms of buzzwords and esoteric legalese of the genre to bring you Massively OP’s Lawful Neutral column, an in-depth analysis of the legal and business issues facing MMOs. Have a topic you want to see covered? Shoot him an email!
