Yuji Naka, the co-creator of Sonic the Hedgehog and former head of developer Sonic Team, has been arrested for insider trading in Tokyo. The news, first reported by Japanese news site FNN, has been corroborated by the Asahi Shimbun newspaper in an English-language report.
Naka is alleged to have bought stock in developer Aiming in early 2020, based on inside information that it would be developing a Dragon Quest mobile game, Dragon Quest Tact. At the time, publisher Square Enix’s partnership with Aiming on the game was not yet public, and Naka was working at Square Enix on ill-fated platformer Balan Wonderworld.
The special investigations unit of the Tokyo District Public Prosecutors Office, which made the arrest, said that Naka had bought 10,000 shares in Aiming for about 2.8 million yen ($20,000) after learning about Dragon Quest Tact in late January 2020, before the announcement of the game the following month. The assumption is that he was hoping to profit from an increase in the share price after the announcement and release of the game — although based on current reporting, it’s not clear if he did sell the shares.
Naka’s arrest Friday follows those of two other former Square Enix employees a day earlier on the same charges. Taisuke Sazaki and Fumiaki Suzuki are said by investigators to have bought 47 million yen ($336,000) worth of Aiming stock between late 2019 and early 2020, after Suzuki learned of Dragon Quest Tact’s existence in November 2019.
According to the Asahi Shimbun, Sazaki and Suzuki sold their Aiming shares after the announcement of Dragon Quest Tact in February 2020, profiting to the tune of tens of millions of yen. The paper’s sources also say that Sazaki was actually a member of the joint development team working on Dragon Quest Tact. Sazaki received a “Special Thanks” mention in the credits for Balan Wonderworld.
Polygon has contacted Square Enix for comment. In a statement issued to VGC Thursday, addressing the arrests of Sazaki and Suzuki, the company said:
Today, some media outlets reported that the former employees of Square Enix were under investigation for suspected insider trading. We have been fully cooperating with requests from the Securities and Exchange Surveillance Commission. As the investigation by the Tokyo District Public Prosecutors Office is underway, we will continue to fully cooperate with the investigation. We deeply regret the great concern this has caused to all concerned. We have dealt with this incident strictly, including internal disciplinary actions taken against the suspected employees.
Naka co-created Sega mascot Sonic the Hedgehog with artist Naoto Ohshima. As lead programmer on the original 1991 Sonic the Hedgehog and its sequels, it was Naka’s code that enabled the game’s signature fast-moving, fluid visuals. Naka left Sega in 2006 and spent a while as an independent developer before joining Square Enix in 2018, where he reteamed with Ohshima to develop Balan Wonderworld.
But the game’s development didn’t go well. Balan Wonderworld was released in March 2021 and met with poor review scores and a controversy about seizure-inducing flashing sequences. In April 2022, Naka revealed that he had been kicked off the project six months before its release, said he had sued Square Enix over his departure, and apologized to fans for the “unfinished” state of the game.
Update (Dec. 7): Yuji Naka has reportedly been arrested a second time on insider trading charges, again relating to his time at Square Enix. The Asahi Shimbun reports (in Japanese) that Naka and Square Enix employee Taisuke Sazaki bought shares in Ateam, developer of the ill-fated mobile spinoff Final Fantasy 7: The First Soldier, before Ateam’s collaboration with Square Enix on the title was made public. This time, Naka’s investment is said to be much larger — 144.7 million yen ($1 million) — and the two men are said to have earned “hundreds of millions of yen” from the deal.