Activist investor calls on game publisher GungHo to file $2.25 million lawsuit against former CEO over alleged failure to prevent fraud by an employee 

A shareholder of game developer and publisher GungHo Online Entertainment has requested that the company file a lawsuit against its former CEO Kazuki Morishita (now chairman and chief development officer). They allege that while serving as the company’s president, Morishita failed to establish adequate internal controls, which resulted in misconduct by a former employee and, by extension, significant financial losses. The request seeks 356 million yen (about $2.25 million USD) in damages, plus delay damages. 

The matter was first reported by Toyo Keizai on October 30, which identified the shareholder as the Hong Kong-based activist hedge fund LIM Advisors. GungHo subsequently confirmed that it had received the request in a notice to shareholders posted on November 2. The company says it has not yet decided whether to file the requested lawsuit. GungHo’s auditors and supervisory board members will first investigate the matter and consider how to respond. 

To provide some background, the request by LIM Advisors is related to a series of fraudulent activities carried out by a former GungHo employee, which the company publicly disclosed back in August 2025. The former employee, who had served as head of the company’s systems division, was fired and arrested in July 2026 on suspicion of breach of trust. 

According to police reports from the time, the former employee allegedly used an online outsourcing platform between January and December 2022 to create accounts under false names, posing as an independent contractor. He then arranged for GungHo to place fictitious work orders (such as requests to investigate product defects), and had the company transfer approximately 40 million yen in outsourcing fees to his false accounts across 12 separate payments. 

GungHo then conducted its own internal investigation, which uncovered that the misconduct had been going on for an even longer time. Between 2017 and 2025, the former employee allegedly used similar methods to pocket approximately 246 million yen (around $1.6 million USD) from the company, misappropriating most of the money. The investigation also identified other irregularities, including approximately 100 million yen in company funds being improperly transferred to business partners as outsourcing fees despite no actual work having been performed.  

The shareholder thus seeks to hold Morishita responsible for the damage caused by these incidents, arguing that he failed to fulfill his duty to establish an appropriate internal control system during his tenure as president. Whether GungHo will actually take legal action remains to be seen.  

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