Chinese Streaming Platform DouYu CEO Arrested Over Gambling, Porn

Posted on: November 7, 2023, 06:49h. 

Last updated on: November 7, 2023, 10:55h.

Erik Gibbs Read More
Expertise: Asia Pacific Gaming, Gaming Business, Global Gaming.

Two years ago, investment research firm Grizzly Reports revealed that the Chinese livestreaming platform DouYu was supporting the proliferation of illegal gambling by its streamers. Now, authorities have finally caught on, allegedly arresting DouYu founder and CEO Chen Shaojie in October for allowing gambling and pornography on the platform.

A sign for Chinese streaming platform DouYu installed in a stadium
A sign for Chinese streaming platform DouYu, installed in a stadium. The company’s founder and CEO, Chen Shaojie, was arrested for gambling and other illegal content on the platform. (Image: Imaginechina)

China’s state-owned Cover News media outlet reported the news, but didn’t specifically state that the authorities had arrested Chen. Instead, it only reported that he was “taken away” and hasn’t been seen or heard from since.

The head of the NASDAQ-listed company isn’t the first to “disappear” from the public eye. Jack Ma, the CEO of eCommerce giant Alibaba, and China Renaissance founder and CEO Bao Fan both met the same fate. Ma now keeps a low public profile, while Bao hasn’t been seen anywhere since this past February.

Chen Builds an Empire

Chen founded his streaming platform in 2014, building it up to become one of the most popular brands in China. It specializes in live content of video games, and also has its own eSports brand.

With a following of around 50 million users, DouYu has been able to corner the game streaming market, branching out into other legitimate areas, such as live cooking and home repair. The site has also allegedly branched out into areas that are still off-limits in China.

Two years ago, Grizzly Reports accused the company of encouraging streamers to create online lotteries and other forms of gambling. The Tencent-backed company allegedly saw the content as a great way to boost revenue.

This past May, the Cyberspace Administration of China, the country’s Internet watchdog, visited DouYu’s headquarters. It was an on-site inspection of the company’s operations that lasted a month, and followed “rectification” orders Chinese authorities gave Chen and DouYu.

Chen’s fate may follow the path of another streaming entrepreneur, Wang Xin. Wang helped bring online streaming to China, but saw his world come crashing down in 2016.

On allegations that he facilitated the exposure to pornography and gambling through his platform, Wang went to prison for three and a half years and had to pay a fine of CNY1 million (US$137,300). He only served two years of the sentence before being released.

DouYu at Risk of NASDAQ Exit

The negative attention Chen and DouYu have received over the past couple of years has hurt the company’s standing. In 2019, it found huge support from investors when it was ready to go public, raising $775 million and achieving a valuation of almost $4 billion.

Since then, things have gone downhill. Its market value has fallen to below $300 million, and Chen’s disappearance will make things worse.

DouYu was trading at $18.72 on NASDAQ on Feb. 12, 2021. That was the highest the price ever reached, and it immediately fell to new lows right after. By November, it was trading at $3.96, and as of Monday afternoon, it was at $0.84.

As a result, NASDAQ has come calling. DouYu said in a statement at the end of October that it had received a letter from the exchange informing it that the company was at risk of being delisted. If it doesn’t get the stock back above $1 for 10 straight days by April 22, it will lose its spot.