(Yicai) Nov. 22 -- The chief executive officer of Chinese game-centric livestreaming site Douyu International Holdings was arrested on suspicion of opening a casino, according to Chengdu police.

“Our bureau has investigated and found that Chen Shaojie is suspected of opening a casino,” the police bureau in Chengdu, China’s southwestern Sichuan province, announced today. “Chen has been arrested in accordance with the law, and the case is under further investigation.”

Douyu was informed on Nov. 20 that Chen Shaojie was arrested by Chengdu police on or around Nov. 16, the Wuhan-based company announced yesterday. Douyu did not receive any official notice by police of the investigation against Chen or the reason for his arrest, it added.

Douyu’s shares [NASDAQ: DOYU] closed down 5.2 percent at 91 US cents in New York yesterday on the news of Chen’s arrest.

“Douyu cannot comment on the nature or expected timeline of subsequent legal proceedings, if any, that may follow,” the firm noted. “Chen’s ongoing detention and any subsequent related legal proceedings and enforcement actions against the parties involved may have a material adverse impact on the company’s reputation, business, and results of operations.”

By the end of March, Chinese internet titan Tencent Holdings was Douyu’s largest shareholder with a 37.7 percent stake. Chen held 17 percent of the total equity.

Rumors about Chen being out of touch because of suspected gambling activities on Douyu recently circulated on Chinese social media.

Earlier media reports claimed that some users allegedly took advantage of lottery rules on the streaming platform to carry out gambling activities, as viewers could buy gifts in a livestreaming room to participate in a lottery to win virtual currencies of between CNY1,000 (USD140) to tens of thousands of Chinese yuan (equal to thousands of US dollars). Online gambling is illegal in China.

Following these rumors, ‘Douyu confirmed that CEO Chen has been out of touch’ became a hot topic on Twitter-like Weibo on Nov. 6, when Douyu told Yicai that the company had no official comment about Chen’s situation.

Chen’s latest public appearance was on the second-quarter earnings conference call in August.

Douyu achieved revenue of nearly CNY1.4 billion (USD196 million) in the three months ended June 30, down 24 percent from a year earlier, and a net profit of CNY6.8 million (USD952,600), compared to a net loss of CNY38.8 million (USD5.5 million) in the same period last year.

Editors: Shi Yi, Futura Costaglione