Why is this American video game company suddenly distancing itself from a Russian oligarch?

Why is this American video game company suddenly distancing itself from a Russian oligarch?

Amidst the new burst of information about hush money, shell companies, and white supremacist websites suddenly swirling around Donald Trump lawyer Michael Cohen and New York-based company Columbus Nova — as well as Columbus Nova’s relationship with sanctioned Russian oligarch Viktor Vekselberg — one detail has provided a bizarre offshoot.

Daybreak Games, a California online game company specializing in massively multiplayer online role-playing games (MMORPGs), is scrambling to distance itself from Columbus Nova — a company that is listed as a subsidiary of Vekselberg’s Renova company.

Michael Avenatti, the lawyer for adult film actress Stormy Daniels, revealed that Columbus Nova had sent a half-million dollars to Cohen, effectively becoming a conduit for a sanctioned Russian oligarch’s funds heading straight to the president’s lawyer.

However, shuffling money to Cohen wasn’t the only business Columbus Nova undertook in the past few years. According to press releases, interviews, and policy statements on Daybreak’s website, Columbus Nova purchased Daybreak in 2015. (It’s unclear how much money the sale entailed.)

Now, however, Daybreak is claiming that the past three years have been a big misunderstanding, and that Daybreak was never owned by Columbus Nova — and that the company, in turn, never had any connection to Vekselberg.

“There has been some confusion concerning Daybreak’s ownership and rumors about the state of the company that have circulated from a few online game websites, and we want to set the record straight,” a recent statement on the company’s online forum read. “We assure you that these rumors are entirely false and that there’s no impact on our business or games in any way whatsoever.”

Daybreak says it is actually owned by Jason Epstein, an executive who recently left Columbus Nova — and who is directly connected to Renova. According to the Internet Archive’s Wayback Machine, Columbus Nova listed Epstein through at least 2016 as a “Managing Partner of Renova US Management, the US investment vehicle for the Renova Group.”

Daybreak has spent the past few days scrubbing its site of references to Columbus Nova, with one Wikipedia user even attempting to write that “Jason Epstein is and has always been the primary owner and executive of Daybreak Game Company.” (The change was not accepted, and the Wikipedia page now highlights the ownership controversy.)

A spokesperson for Daybreak told ThinkProgress that previous confusion about Daybreak’s ownership stemmed from Epstein’s role at Columbus Nova, and that previous statements about Columbus Nova owning Daybreak came from people “just sort of assum[ing]” that Columbus Nova had purchased Daybreak. As Massively Overpowered, a site dedicated to MMORPGs, wrote, Daybreak told them it was all a “miscommunication.”

Playing games

It is technically possible that the past three years of statements about Columbus Nova’s purchase of Daybreak were all mistakes and typos. But the litany of slip-ups, as Ars Technica found, were myriad. As a quick sampling:

  • In an official statement in 2015, Daybreak, which was then known as Sony Online Entertainment, wrote that they “have been acquired by Columbus Nova.” The company issued a further statement on their official forum, noting that they were “pleased to announce that we have been acquired by Columbus Nova.” Ars Technica also reported the same at the time, writing that “Columbus Nova announced it has purchased” Daybreak.
  • In 2015, Daybreak identified Columbus Nova as one of its “parent companies” on its privacy policy.
  • In 2015, a statement from the Fenwick & West legal firm said that it had represented Daybreak “in its recently announced acquisition by Columbus Nova.”
  • In 2015, Polygon reported in a lengthy feature on Daybreak that Columbus Nova purchased the company. “After kissing a lot of frogs, we finally found a happy home with Columbus Nova. It was really a match made in heaven,” John Smedley, Daybreak president at the time, said.
  • In 2015, Smedley told an online forum dedicated to one of Daybreak’s games that the “opportunity to go out and get investors like Columbus Nova that think about things for the long haul was a big deal to us.”

Information about Daybreak’s reported sale to Columbus Nova also made the rounds on Twitter:

For good measure, Daybreak even received criticism for the purchase in 2015. In a harbinger of critiques to come, a 2015 piece in Paste Magazine pointed directly to Columbus Nova’s connection to Vekselberg as reason for concern.

While it’s obviously at a great remove, Vekselberg is the owner, in the end, of Daybreak,” Paste Magazine’s Ian Williams wrote. “He almost certainly will never deal with it personally. He may not even really know that he owns it beyond seeing it mentioned in a report now and then. But he does own it. And the stuff he’s involved in, the oil and the steel and the shady land deals and the militias, are involved with Daybreak, too.”

Laundered gains

The natural question now hanging over Daybreak is: why? Why go through the hassle of trying to walk back three years of claims, especially when any attempt to do so would be so obvious?

One explanation is that, given Vekselberg’s recent placement on the U.S.’s sanctions list, any entity connected to his portfolio is suddenly at risk, both of reputational damage and potential legal implications. Columbus Nova, unsurprisingly, presents a prime example of the type of fallout Daybreak may have seen coming if it didn’t try to distance itself from Vekselberg.

But there’s another possibility. For the past few years, there’s been increasing scrutiny on online games providing platforms not necessarily for gamers, but for those looking to share information — and move massive amounts of money.

As a result, video games have become the next frontier in money laundering.

While there haven’t been any large-scale studies yet on the topic, early research has found that the games Daybreak specializes in — massive, sprawling settings, involving large numbers of players and transactions — provides premium avenues for the types of money laundering that authorities would never detect.

MMORPGs “provide an easy way for criminals to launder money,” security researcher Jean-Loup Richet wrote. “Using the virtual currency systems in these games criminals in one country can send virtual money to associates in another country. Then, the virtual money can be transferred into real money, with the criminals leaving no trace of evidence authorities could follow back to them.”

One anti-corruption expert with whom ThinkProgress spoke backed up Richet’s findings, adding that money laundering via video games is significantly cheaper than more traditional means of cleaning dirty money. 

To be sure, there’s no indication any money laundering has taken place within Daybreak’s games, or that concerns about money laundering caused the recent scramble for Daybreak to disavow prior statements about Columbus Nova’s ownership.

However, Daybreak customers haven’t shied from suggesting that a company like Daybreak — one that spent the past few years saying that it was ultimately owned by a Russian oligarch now sanctioned by the U.S. — could be a handy tool for laundering funds, especially for someone trying to get money out of Russia proper.

As one user wrote on Massively Overpowered, laundering money via the types of games Daybreak provides “is not impossible, and in the grand scheme of money laundering is probably logistically much simpler [than] many of the other scheme[s], and it would all look legitimate and be mixed in with a fair amount of actual legitimate consumer transactions.”

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