GungHo Online Entertainment, the studio behind Puzzles & Dragons, has claimed that a former senior executive embezzled ¥346 million ($2.35 million) by creating fake work and outsourcing orders to misappropriate company funds.
In a statement released on August 14, 2025 (via Automaton), GungHo Online Entertainment alleged that a former senior executive, who was dismissed for disciplinary reasons, had “engaged in misconduct” over the last few years, including the “misappropriation of company funds through the place of fictitious work orders” (via Google Translate).
“The company became aware of the suspicion of fraudulent activity by the former employee and conducted an initial investigation with the support of forensic teams from external law and accounting firms to determine whether the former employee had engaged in fraudulent activity and to clarify the facts of the matter,” GungHo Online Entertainment wrote in the statement.
GungHo Online Entertainment goes on to allege that, as a result of this initial investigation, it “confirmed” the former employee had embezzled approximately ¥246 million ($1.67 million) of company funds by using a third-party job-ordering service to create “fictitious work orders” which named the company as the client and the former employee as the contractor.
In addition, GungHo Online Entertainment alleges that it “confirmed” the former executive had “fraudulently paid outsourcing fees to a business partner despite the fact that no work had actually been performed,” resulting in a further loss of ¥100 million ($680,000).
In response, the company formed an internal investigation team, led by two independent, external auditors and supported by forensic teams from external law and accounting firms.
The investigation has been conducting interviews with those involved and aimed to provide a “detailed investigation into the facts of the fraudulent conduct in question through digital forensics of the devices used by the former employee.”
The team has also been investigating whether there were any similar cases, “analyzing the causes, and formulating measures to prevent recurrence.”
As a result of this alleged misconduct, the employee in question was dismissed on July 24, 2025.
GungHo Online Entertainment claimed in its statement that the alleged fraud was “maliciously and independently committed by the former employee, who was a senior executive with discretion and authority.” The company also claimed the former employee “engaged in cover-up efforts to avoid detection.”
In the statement, GungHo Online Entertainment revealed that it “has been consulting with investigative authorities and holding discussions regarding filing criminal charges.”
“The company is currently in concrete discussions regarding the acceptance of charges against the former employee and is fully cooperating with the investigative activities of the investigative authorities,” the statement reads.
“Therefore, in consideration of the potential hindrance to the investigative activities, the company will refrain from disclosing the details of this misconduct.”
GungHo Online Entertainment apologised for the “inconvenience and concern” the alleged incident may have caused to relevant parties, but said the impact on the company’s financial results for the fiscal year ending March 31, 2026, is expected to be “minor.”
GungHo Online Entertainment is currently facing a shareholder revolt, with the company due to hold an extraordinary general meeting on September 24, 2025, where shareholders will vote on whether to oust its current CEO and president, Kazuki Morishita.
