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Chinese Game-Streaming Mogul Arrested in Latest CEO Probe

(Bloomberg) -- Chinese police have arrested DouYu International Holdings Ltd.’s founder Chen Shaojie, the latest in a series of executive detentions that have chilled the country’s giant private sector.

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Police from the southwestern city of Chengdu detained the game-streaming tycoon on or around Nov. 16, DouYu disclosed in a statement Tuesday, revealing his plight weeks after reports surfaced the chairman had gone missing.

Chengdu police said it had arrested and charged a person surnamed Chen with hosting gambling without fully identifying the defendant in a post on its official Weibo account on Wednesday. Xinhua and other official media then reported on the case using the hashtag “DouYu CEO’s Arrest.”

Regulators had begun a probe into pornography and gambling on DouYu’s platform earlier, the Financial Times reported this month. The company’s shares closed down 5.9% in New York on Tuesday.

Beijing periodically cracks down on internet content, part of a broader campaign to stamp out dissent and maintain its grip on a medium it deems potentially dangerous to its hold on power.

Chen’s company operates one of the country’s largest streaming video services, often compared with Inc.’s Twitch because of its focus on gaming. Game streaming platforms were one of the hottest arenas of the Chinese internet sector, until short-video apps like ByteDance Ltd.’s Douyin stole their limelight with more addictive content in recent years.

Faced with growing competition, DouYu has seen its revenue plunge for six straight quarters. It is now valued at less than $300 million, down from a record high of $6 billion in 2021.

In December, a district court in Chengdu fined three top DouYu influencers a combined 1.65 million yuan ($231,000) for making nearly 120 million yuan from hosting gambling on the platform, according to a report in state-run Sichuan Legal News. From 2017 to 2020, the livestreamers urged fans to spend on virtual gifts in return for lucky draws for money prizes, the report said.

The court sentenced two of the defendants to six years in prison while the third was given a suspended sentence. A DouYu spokesperson declined to comment on the December court ruling.

DouYu in 2021 was poised to merge with rival Huya Inc. in a deal brokered by backer Tencent Holdings Ltd., before regulators nixed the transaction at the height of a broader crackdown on the excessive power of data-rich internet companies.

DouYu was notified of Chen’s arrest on Monday but hasn’t received official notice of the reasons behind his detention, the company said in its brief statement. DouYu is operating normally but is working on unspecified contingency, it added.

Beijing for years has taken custody of high-level figures with little explanation, though many such cases involved alleged graft and sensitive industries. This year, the sudden disappearance of China Renaissance Holdings Ltd. chairman and founder Bao Fan in an unspecified investigation sent shockwaves through the country’s financial services industry.

Chen was already a serial entrepreneur in China’s gaming sector before co-founding DouYu in 2014. He previously built a multi-player platform for esports titles like Warcraft, and founded anime streaming site AcFun, which was the chief rival of Bilibili Inc.

(Updates with announcement from local police, share price)

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