Financial scandal engulfs Chinese gaming company Kingnet

Both the founder and CEO are being investigated for securities fraud.

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Financial scandal engulfs Chinese gaming company Kingnet

Chinese gaming company Kingnet Network is officially embroiled in a white collar scandal.

Roughly two weeks ago, the company’s biggest shareholder, Wang Yue, was arrested by the Shanghai police on suspicious of market manipulation.

Yue, who founded Kingnet and became its CEO, had been incommunicado for over a month and resigned from the company’s board of directors three days before he went missing. He holds more than 21% of the company’s shares.

Now, Kingnet has issued a statement via the Shenzhen Stock Exchange saying Chen Yongcong, its current CEO and CFO, is also under investigation for manipulating the securities market. Chen, directly and indirectly, holds about 2.2% of the company’s shares.

Kingnet, which publishes browser- and mobile-based games, went public in December 2015. It saw net profit drop 64% year-on-year from RMB 245.6 million (USD 36.2 million) to RMB 88.3 million (USD 13 million) in Q1 2018.

As the company grapples with Chen’s investigation, Kingnet says the duties of the CFO will be performed by the members of its board of directors and others on the management team.