The Entire Breakdown of the H1Z1 Pro League Controversy

Sony Online Entertainment Turns into Daybreak Game Company

In the winter of 2015, Sony Online Entertainment announced they were leaving behind their home at Sony. SOE was going to become Daybreak Game Company after an investment from Columbus Nova. The investment allowed the company to walk away from their roots to create and publish their own games on different platforms, including Microsoft’s Xbox One.

“Today, we are pleased to announce that we have been acquired by Columbus Nova, an investment management firm well known for its success with its existing portfolio of technology, media and entertainment focused companies. This means that effective immediately SOE will operate as an independent game development studio where we will continue to focus on creating exceptional online games for players around the world, and now as a multi-platform gaming company. Yes, that means PlayStation and Xbox, mobile and more!” – via Engadget.com.

The new Daybreak went forward with the first battle royale game to touch the industry, H1Z1.

Russian Ties Force U.S. Government to Step In

The entire video game community woke up to a press release from the United States Department of Treasury on April 6, 2018. Within the press release was information regarding the U.S. government’s investigation into Russia’s involvement with the 2016 presidential election. When Daybreak’s parent company Columbus Nova was implicated to have Russian connections in the press release and served sanctions, the esports community went wild

The press release named “seven Russian oligarchs and 12 companies they own or control, 17 senior Russian government officials, and a state-owned Russian weapons trading company and its subsidiary, a Russian bank.” A few paragraphs later, the government announced that “all assets to U.S. jurisdiction of the designated individuals and entities, and of any other entities blocked by operation of law as a result of their ownership by a sanctioned party, are frozen, and U.S. persons are generally prohibited from dealings with them.”

The owner of the Renova Group and its subsidiary Columbus Nova, Viktor Vekselberg, was one of the specific targets. Vekselberg is the main owner and president of the Renova Group. The Renova Group is a Russian conglomerate with interests in oil, energy, aluminum, telecoms, and other ventures. The conglomerate is the parent company of Columbus Nova.

President Trump’s personal attorney Michael Cohen was publicly tied to Columbus Nova, which put Cohen in legal trouble. It is alleged that Columbus Nova paid Cohen $500 thousand after the 2016 presidential election. It is not known what the payment was for, however, Trump’s inner circle has been publicly connected to Vekselberg. The Russian billionaire was able to attend Trump’s inauguration thanks to his American cousin, Andrew Intrater, who is the president and CEO of Columbus Nova.

Around $2 billion in assets from Vekselberg were frozen due to the sanctions. There has been no public tie between Columbus Nova’s assets and Daybreak’s. Is it unclear if Daybreak’s assets were unfrozen since April 2018.

A Wave of Updates and Corrections

After the Department of Treasury’s release, Daybreak issued a statement claiming they were not owned by Columbus Nova. This statement raised suspicion as this “statement” directly disputed their press release from 2015. Daybreak’s CEO, John Smedley, directly named Columbus Nova within the release.

Daybreak later issued another statement claiming that the initial statement about Columbus Nova’s acquisition of Daybreak was an error, and they now were correcting it. That information was open to the public for over three years.

“It was current executive chairman Jason Epstein, former senior managing partner of Columbus Nova that acquired Daybreak, not Columbus Nova itself. That distinction was never corrected in the past, so we are correcting that now” via a statement made directly to MassivelyOP.com from Daybreak’s PR.

The internet was perplexed by these statements, as Daybreak seemed to be stumbling over a deep secret. Online outlets and internet users soon found that Daybreak deleted the 2015 press release from their servers that directly named Columbus Nova as the acquirer. Digging even deeper, it was discovered that Daybreak referred to Columbus Nova directly within Daybreak’s privacy policy. The privacy policy from 2015 was located by a fan over at MassivelyOP. The link now returns with a 404 error.

“Daybreak Games may share your Personal Information for the purposes described in this Privacy Policy (except for direct marketing) with its parent companies, which consist of Columbus Nova Private Equity Group (‘CN’) and any company controlled by CN that directly or indirectly owns fifty percent (50%) or more of the outstanding equity in Daybreak.”

After the press release was deleted from the servers, it was uncovered that a Wikipedia account named “Daybreakpr” was blocked. The Wikipedia account was trying to edit the online entry to reiterate that Epstein, not Columbus Nova, owned Daybreak. The block occurred around the time the government’s sanctions were handed down.

After numerous updates from Daybreak, there were several waves of layoffs at the company. Daybreak’s future was uncertain, and the company needed a strategy to not drown from public relations disasters, alleged Russian interference and involvement, and frozen assets.

Jace Hall: The “Savior”

In August, Jace Hall dropped a bomb on the H1 community with his infamous “A Message From Jace Hall” post on the game’s dedicated forums. Jace Hall was previously with Monolith Studios, where he worked on projects like F.E.A.R., The Condemned series, and Middle-Earth: Shadow of Mordor. Hall was also the CEO of Twin Galaxies, which is known for recording video game world records. Hall took over as the CEO in 2014, which would mark his first official venture into esports. Within a month of him taking over the site, it came back online with a forum and a free-to-submit high score database. Hall seemed to be the man with a plan, as Daybreak tapped him to be H1Z1’s new PC Lead.

“For the moment, the absolute entire detail surrounding this change of control has not been completely and publicly articulated yet – however there are some very rational and positive NDA related reasons why some details have had to be slightly delayed, so I ask the community to please bear with me for the moment.” –via Jace Hall’s post.

The lengthy post went on to describe some of Hall’s specific plans for H1Z1, his aspirations for the BR game, and his gratitude towards the “dedicated community”. The new PC lead went on tell the community that “if you do your research on me, you will find that I have been involved in the creation of many well-known successful video games, game franchises, and game companies/publishers.” Did Daybreak finally find their knight in shining armor that would rescue H1Z1 from peril?

H1PL Split 1

Daybreak and Twin Galaxies partnered together to create an H1Z1 professional league. Within the joint venture, the companies were creating a league that would deliver the “next step” in competitive esports. The league was going to set designated rules and regulations, a management team, minimum player compensation, a governance committee, and more. The league would offer equal representation by having a spokesperson for players, organizations, Twin Galaxies, and Daybreak. It was a surprising move, but the community was ready to see what Daybreak and Twin Galaxies was ready to offer.

Within the business plan was an allocated stipend for each team that would shift focus onto the individual players, not the game itself. Twin Galaxies hoped that this avenue would help generate storylines and team-focused content.

The H1PL was adamant on treating their players and staff properly and promised each player a minimum salary of $50,000 a year. Each organization that was invited to the league would be given a $400,000 stipend for player salaries and content production. The stipend would be paid out between two installments; one $200,000 payment before split 1, and the second $200,000 payment seven weeks before split 2.

The H1PL found a home in Las Vegas thanks to the help of Caesars Entertainment. There would be a 50,000 square-foot facility that would become the production facility. A circular stage would hold 75 stations for each player. Each station would be equipped with league sponsored accessories and gear. Some of those companies include AK Racing Chairs, ASTRO, and ASUS. Matches would be streamed exclusively through Facebook, and the deal included a paid-partnership.

Several notable esports organizations were invited to the H1PL like Cloud9, Team SoloMid, Echo Fox, and Luminosity. With big-name organizations being involved with the H1PL, it seemed like Daybreak and Twin Galaxies managed to pull off a miracle.

Eggs in One Basket

The first split kicked off, and issues within the league began to pop up.. Players and organizations set up locations across Las Vegas, with some moving into the United States from foreign countries. A few organizations event went as far as purchasing team housing within the Las Vegas area.

Split 1 ended at the end of June, and SetToDestroyX were the winners of the first inaugural split. Teams were hard at work to prepare for the last half of the season. People on the outside were under the impression that the H1PL was working.

As teams waited to compete in split 2, which was approaching on September 15, the league decided to push the split. Multiple layoffs at Twin Galaxies and H1PL’s production team were reported. Twin Galaxies were quick to state that there was a “hiatus”, but ex-employees began searching for new employment opportunities.

The start date for the split passed, and there was no update. Teams were starting to get wary as they didn’t have a split 2 start date, and they were yet to receive their split 2 payments. Organizations soon began to pay out of pocket to pay their players’ salaries, which they were contractually obligated to do. Even as Daybreak and Twin Galaxies refused to issue any updates, organizations held on to the hope that there would be a split 2.

At TwitchCon 2017 in San Diego, Jace Hall reportedly held a meeting with organizations and staff to discuss the future of the H1PL. Hall stated that Daybreak had plans in the works to help drive attention to H1Z1, as the player base was in a rapid decline. Teams were worried that there would be no league due to the game’s player count, but Hall was quick to comfort them. Hall stated that there would be a league, even if there were “only 75 players”.

A month later ESPN published a piece that claimed the H1PL will shut its doors, and will not be having a second split. Jacob Wolf was able to receive a copy of the statement that Hall sent out to the league’s teams and players.

“It’s with a heavy heart that a letter has been sent to the League’s team organizations providing notice that the 2nd Split has been suspended indefinitely, and that a second league season will not be renewed or scheduled at this time. As a result, teams have been immediately released from their League specific obligations.” – via ESPN’s report.

Twitter went ballistic and wanted answers. Daybreak and Twin Galaxies secured $27 million for investment into the league, yet Hall refused to show financial documents. Players and fans wanted to know why H1Z1 was considered to be in a league since the game went into a steep decline. In October 2017 there were 31,000 concurrent players, but by September 2018 there were less than 3,000 players. How did Twin Galaxies and Daybreak manage to secure investors with a less than impressive player count?

A couple days later, VPEsports released their article about Hall and the league’s failure. The article went into detail about Hall’s lack of effort, shady business practices, lavish parties, and poor business projections.

Hall was the center of it all as he chose to broadcast the league exclusively on Facebook, and at a time where European and American audiences would miss out. Hall tried to help market the team by paying influencers and celebrities to participate, like Michael “Shroud” Grzesiek, Jaryd “Summit1G” Lazar, and actress Michelle Rodriguez. Over $2.5 million was spent on appearance fees for these personalities. The league was hoping to make some of that money back through ticket sales, but they never happened. VPEsports claims that “paid audience members were obtained from the nearby Caesar’s Employment Center” throughout the split.

According to VPEsports, Hall often threw lavish parties and events to help connect players with the H1PL staff and Hall. Important people within the league were often not invited to these parties, where there was an open bar and rented rooms for the night. According to Caesar’s Casino, an open bar can cost between $4,000 and $7,000 a night.

“There seemed to be unnecessary spending all over the place. A lot of the TG [Twin Galaxies] employees seemed more interested in having a good time in Vegas instead of establishing a healthy, competitive league.” – via VPEsports.

The league’s decision to broadcast on Facebook exclusively was frowned upon within Daybreak and Twin Galaxies, but Hall made the decision to move forward. A previous employee who worked with Hall told VPEsports that “Facebook was shady, but they did provide us with a $200k advertising credit. They [Facebook] turned off boosting a few times after the Daybreak-Russian [sic] tie-in.”

“…If we didn’t boost we would get 100k views, keep in mind Facebook counts a view as 3 seconds, when we boosted we could get 1-1.5 million views with most of those coming from Brazil and the Philippines. What’s interesting about our premiere of H1PL, we ended with 1.1M views without boosting, and then all of a sudden we hit 3.2M views two days later.” – via VPEsports’ report.

Multiple sources reported to VPEsports that the league artificially inflated numbers to help boost their presentations to potential sponsors and investors. The table below was created by VPEsports after they compiled information on the alleged statistic boosting.

On August 20, Hall went to each of the league’s participating organizations claiming that a “force majeure” event took place at Daybreak. A force majeure is when unforeseeable circumstances prevent a party from fulfilling a contractual obligation. Hall refused to provide details, which is required through the League Participation Agreement. The CEO then went on to tell organizations that Twin Galaxies did not expect them to continue paying their players, even though the organizations were contractually obliged. Hall claimed that he could not release details due to a non-disclosure agreement he signed. VPEsports reached out to Daybreak for confirmation, but they replied that they were “unaware of any such force majeure event.”

On July 3, an extensive round of layoffs on the production side of the league hit. These layoffs happened because Facebook did not renew their funding agreement. This was around the time when Hall knew the league was not going to succeed but continued to provide false hope. Facebook previously provided a $4 million investment into the league, allegedly.

Organizations were upset about the “force majeure”, and were frustrated that Hall refused to disclose the reason for the “force majeure event.” Organizations began requesting financial documents to show how and where the H1PL spent their money. Within the league agreement financial statements are to be provided at the end of the fiscal year, which would land on April 2019. Hall and Miranda Charsky, who was previously the director of Esports leagues at Twin Galaxies, still refuse to show these documents.

Charsky was responsible for league projections and financial projections. VPEsports was able to obtain partial budget records, however, Charsky is allegedly holding the full records to herself and keeping them away from staff. VPEsports created the charts based off of actual documents sent to the team.

A couple of previous employees who worked with Hall spoke with VPEsports anonymously, fearing backlash and lawsuits claimed that Hall always pushed blame onto others.

“Jace is super abusive. He would say that the show was shit and they didn’t get any views. He blamed production staff even though he spent no time in the office and when he was, he would be busy playing ping-pong with Rick Fox. One night he freaked out and fired everyone.” Another ex-employee also said that “Jace thinks he’s smart, but he really just wants to play video games and have others run his business.” – via VPEsports.

“Honest and Transparent”

About six hours after the article was released, Jace Hall made a public statement on his Twitter. Hall stated that he read the article and that there was “actual made up **** in that piece.” The CEO wanted to face all questions live on stream, and that is what he did. Hall was live for almost three and a half hours.

Hall went live on Periscope in order to be “honest and transparent” with the community and to clear any accusations. He started the stream by beginning to read the article by VPEsports. Hall went on to state that he had yet to “fully read the article in detail”, and that this would be his first official read through. His live stream comments directly disputed his tweet from earlier in the night.

Hall picked apart every sentence by claiming that the author’s facts were incorrect or simply made up. He also stated that he was never reached out to about contributing his thoughts to the article, yet there are public tweets of VPEsports’ editor in chief Kevin Hitt and writer Elle Thibeau to Hall. He later went on to insult the writer’s fact-checking, use of anonymous sources, and lack of ethics.

When Hall went over the article’s subsection on the league’s alleged lavish spending, he claimed that he did not have any “direct involvement” in securing audience members. A few sentences later, Hall then claims that it was all under “good intentions” and they had a “planned budget”.

As Hall read the next subsection about his alleged activities, or lack of, while employing others, he nervously laughed. The CEO began to talk about how he has been in the game space for years, starting with Monolith in the 1990s, and suddenly stopped as if he remembered something.

“Oh, I totally figured it out. I know what this is. Okay, this is good reporting! I know exactly what this is, because you want the honest truth. I whipped so many people’s asses in video games. Like, I’ll be in-game, and then they’ll lose, and we are sitting side-by-side. Like, I just beat them so bad that that can feel abusive. That’s got to be what this is!” Via Jace Hall’s Periscope live stream at 69:00.

Hall did not make any more statements regarding previous employee’s thoughts on his work ethic and his workplace attitude.

When he started to read about Facebook and Caesar’s involvement in the league. Hall stated that Caesar’s was not a direct investor in the league, however, his statement goes directly against the press release published during the H1PL’s inception. Hall claimed that Caesars did not invest any money, however, he did not say anything about Caesar’s direct involvement or investments made through manpower, resources, or perks. Caesars was directly involved with the creation of the production studio and broadcasting. Around halfway through the article, Hall claimed that employee counts were “flat wrong”, yet did not offer any more information.

Once he arrived at the subsection talking about unstable relationships, Rick Fox popped in the stream behind Hall. Fox comforted Hall and told him to relax and “not to waste your energy”. Hall told Fox he wasn’t and that he felt that “the gaming community needs this”.

“I think that there is a lot of bad overall behavior and attitudes we have against each other in this space. And I think that no one stands up and just owns the situation and helps to try to set an example.” Via Jace Hall’s Periscope live stream at 186:25.

Hall ended the stream by saying that the league’s intention is to fulfill their contractual obligations to each team. The CEO then stated that any issue a player has with payments, once the stipends are delivered, then that issue will remain between player and organization. Once the calendar year passes, organizations and players then can pursue other actions to receive the rest of their $200,000.

Hall ended his 200-minute stream without answering any direct questions, live on stream like promised. His Twitter activity soon turned into its regularly scheduled H1Z1 tweets.

Moving Forward

Organizations and players have begun to move on to different avenues, some include gaming while others do not. One family has decided to stay in Las Vegas, and earning a certificate to offer Foster Care. A few players decided to switch over to different games like Fortnite or PlayerUnknown’s Battlegrounds. Until January 1, 2019, organizations cannot pursue legal action against the H1PL and Twin Galaxies. Organizations will not be able to access financial documents from the league until April 2019, unless directly provided by the league. It is expected that all participating organizations will be requesting an audit on the league’s financials, and possibly Twin Galaxies, once the fiscal year comes to a close.

Hall has kept relatively quiet and has kept on with his work at Twin Galaxies and H1Z1. There have been no official updates since VPEsports’ report last week.