How Riot's TSM Decision Differs from the Echo Fox Case

At face value, the two look similar. But behind the scenes, TSM and Echo Fox have one clear difference around a breach of contract.

July 14, 2022

On Wednesday, Riot Games took action. After a seven-month investigation by the “League of Legends” game developer into the top executive of the game’s most popular North American  team, Riot levied punishment against TSM CEO Andy “Reginald” Dinh. 

Finding evidence of bullying and disparaging behavior by Dinh against his current and former players and staff, the league fined Dinh $75,000 and placed him on a two-year probation with an active third-party monitor. If Dinh acts this way again, Riot says, it will levy a more severe punishment.

The ruling is a culmination of months of reporting by journalists such as Mikhail Klimentov at The Washington Post and Cecilia D’Anastasio at WIRED into issues that—to many in the esports industry—hid in plain sight. It also somewhat contradicts an internal investigation conducted by TSM that found, despite the way he has spoken to employees over the years, Dinh committed “no unlawful conduct.” Riot didn’t suggest otherwise, but the rollout of its investigation seems much more serious in tone and discipline compared to TSM’s own actions.

One of the longest-standing players in the game’s history, Dinh’s behavior toward colleagues, players and media is well-documented in public Reddit posts, video clips and Twitter tirades over the past decade. 

Yet, before a call to action by the League Championship Series Players Association and one of the game’s most successful players, Yiliang "Doublelift" Peng, Riot let it slide. Riot’s punishment, which over the past 24 hours some influential parties in the esports industry have equated to a slap on the wrist, is too little, too late.

That said, it’s about as far as Riot can go—at least legally. 

In the aftermath of the ruling on Wednesday afternoon, TSM and Dinh drew parallels to Echo Fox and one its shareholders, Amit Raizada, who in 2019 used racist language toward a colleague, in an email that was later leaked to the press. Unable to remove Raizada from its cap table, Echo Fox were forced to forfeit its slot, at Riot’s behest. 

“Echo Fox was given 60 days to remove an investor that called their former CEO the n word or be dismantled and have their LCS spot revoked,” commentator Kari Keone tweeted Wednesday. “Can someone explain how a decade of sustained, well documented abuse does not merit a harsher punishment? This feels like favoritism/bias.”

Ultimately though, Raizada’s behavior—or at least his choice of words—isn’t what cost Echo Fox its LCS spot. Riot revoked that spot because of a violation of the team participation agreement between the two parties, sources told The Jacob Wolf Report. 

In late 2018, amid tough financial waters internally, Echo Fox’s sister company, Twin Galaxies, made the team a loan. If not paid, the loan could convert into equity with significant preferences to the shareholder. Ultimately, in dire financial straits of its own, Twin Galaxies sold that loan to Raizada, and when Echo Fox could not pay, he converted it into that preferred equity, according to sources.

In the LCS team participation agreement, Riot requires approval for major ownership changes, and a team must disclose them. In the case of Echo Fox, not only did it not seek approval for Raizada’s loan equity conversion, it didn’t tell Riot, either.

The narrative around Raizada’s language is convenient. It made Riot look as if it acted against an investor espousing racist language toward his business partners, in the way the NBA did against Los Angeles Clippers owner Donald Sterling in 2014. (The NBA forced Sterling to sell his team after TMZ reported anti-Black comments he made in secretly recorded phone calls with his mistress.) 

But Echo Fox ultimately breached its contract with Riot and made the decision—from a legal perspective—much easier. 

With TSM, Dinh has not violated his agreements with Riot, and many of the transgressions exist outside of Riot’s purview, in parts of TSM’s business that aren’t governed by Riot’s rules. Their ruling against Dinh, albeit too tame according to the public, is about as far as they can go—or at least without a legal battle that would likely cost both parties millions in litigation fees. That much was clear in their investigation.

“While we saw other allegations raised publicly during the course of the investigation, including the characterization of contractors and employees under relevant state or federal law, those questions are ultimately outside the scope of our investigation until and unless there is a ruling by a court or arbitrator, or a public settlement involving an admission of wrongdoing, which could trigger additional investigative actions and/or penalties under the Rules and TPA,” Riot said in its ruling on Wednesday.

“Ultimately,” Riot’s statement continued, “we strive to walk the fine line between protecting our sport and enforcing our rules on the one hand and adjudicating disputes or replacing courts, arbitrators or in some cases, the police on the other hand. In addition, our review of incidents that occur in a team’s ancillary businesses is generally limited to instances of illegal action or moral turpitude.”

By issuing a probation, Riot is putting Dinh on notice: Mess up again and your ousting—or worse, your team’s—isn’t off the table. 

One More Thing: 100 Thieves conducts layoffs, six months after $60 million funding round

100 Thieves laid off at least 17 employees this week, just six months after the company announced a $60 million Series C funding round that made it among the most valuable teams in esports.

Former Sports Business Journal and The Esports Observer editor James Fudge compiled a list on his Substack of employees who made public statements regarding their job searches. The departments hit the hardest were the organization’s social media and video production teams. 100 Thieves declined to comment on Thursday when reached by The Jacob Wolf Report.

The layoffs come at a time when most esports teams are pivoting or significantly diversifying their businesses, and 100 Thieves is no exception to that trend. 

On May 16, 100 Thieves announced it will be developing a game, codenamed Project X, which it recently clarified will be a console and PC shooter. To lead that charge, it brought on former TellTale Games CEO Pete Hawley, who also worked as an executive at Electronic Arts’ Criterion Games (“Burnout”) and Lionhead Studios (“Fable”).

In December, 100 Thieves finished its Series C funding round, netting $60 million on a $460 million post-money valuation. Per Forbes’ estimation, that makes it the second-most valuable team in esports, behind only TSM. That could change, depending on a Friday vote that will likely see FaZe Clan go public via a SPAC merger, which it claimed in September will raise its value to $1 billion.