In March 2022, a Dexerto report revealed that TSM had parted ways with League of Legends coach Peter Zhang after allegations of conflict of interest and financial irregularities. TSM now claim it has been confirmed that Zhang diverted player salaries and withheld owed money amounting to over $300,000 following an internal investigation.

Specifically, the claims were that Zhang was siphoning off money from player salaries for himself as well as acting as a conduit for financial transfers between players and unspecified entities back in their native China.

In addition to this, he had also kept money relating to the sale of an $80,000 car for one of TSM’s high-profile signings, Hu ‘SwordArt’ Shuo-Chieh, when they left the team. After repeated requests for repayment, Zhang grew desperate and started to ask players and colleagues for sizable sums of money, citing “medical bills” for his grandmother as the reason he had found himself in dire financial straits.

While Zhang acknowledged that he had kept the money from the car sale, vowing to pay it back, he denied that he was taking a cut of player salaries or had picked certain players for the roster to facilitate doing so.

In a Twitlonger released just a few days after the initial report, he stated that “I’m not [a] player agent and never took a cut… The part of the article that did not make sense to me is where it said I was acting as [a] player agent and taking their money while getting them a spot on TSM.”

He added: “Anyone can check that I am telling the truth by asking any of these players or any player I have ever worked with. I have never asked to be their agent to talk to TSM and I have never taken a part of their salary. They will all agree with me.” With that, he returned to China and his future remained unclear.

The TSM organization had stated it was their intention to investigate and today will see them publicly release their findings that claim they have multiple sources of evidence that not only substantiate the original claims but also reveal the extent of them.

After being retained to conduct their investigation on March 23, Simpson Thacher & Bartlett LLP returned their findings last week and made the following claims:

• Mr. Zhang diverted a total of approximately $250,000 in salary payments from two TSM players to himself and third parties.
• Mr. Zhang agreed to sell a car on behalf of a player who was leaving the U.S. to return to Asia. That car was sold for $80,000, but the player never received the proceeds from the sale. Only after the player threatened to report Mr. Zhang to authorities did he receive a portion of the funds, roughly $35,000. To date, the $45,000 balance remains unpaid.
• Mr. Zhang attempted to borrow money from eight TSM players and staff members, including players over whom he had managerial responsibility. He claimed these funds were needed to pay for, among other things, his grandmother’s medical treatment in China. Mr. Zhang attempted to solicit amounts between $1,500 to approximately $22,000 per player. Two players lent Mr. Zhang a total of approximately $15,000, of which Mr. Zhang has since repaid approximately $10,500. The company became aware of Mr. Zhang’s solicitation for loans on or around March 18, 2022, and took immediate action to stop more money from being lent to Mr. Zhang, including reversing several scheduled wire transfers. The company’s prompt response prevented approximately $54,000 from being sent. To date, approximately $4,500 remains unreturned by Mr. Zhang.

In addition to this, it was the conclusion of the law firm that Zhang was not acting in the best interests of the organization, their report stating that “we observed evidence indicating other irregularities in connection with Mr. Zhang’s role in recruiting players from China. In particular, certain recommendations Mr. Zhang made to TSM may have been motivated by personal gain,
including in connection with the salary diversion scheme discussed above, rather than recruiting the best players for the team.”

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At the center of it all was a working relationship between Zhang and the former head coach of Victory Five, Wang ‘HanYi’ Han-Yu. Han-Yu, now working as a talent agent in China, represented two of the players that were acquired by TSM and is claimed to, through Zhang as a proxy, take financial reimbursement if he was able to place them on the TSM roster. The payments were said to be distributed across seventeen bank accounts, one of which belonged to Zhang and one to Han-Yu.

“As a result,” the report reads, “the vast majority of the players’ salary payments between December 2021 and February 2022, including their large upfront payments, were diverted to bank accounts not affiliated with the players, of which one was owned by Mr. Zhang; and another was owned by WANG ‘Hanyi’ Hanyu.

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“While we do not know the relationship between the owners of the remaining bank accounts and Mr. Zhang and/or Hanyi,” it continues, “certain evidence suggests that all of the diverted funds were eventually received by Mr. Zhang, Hanyi, Hanyi’s talent agency company, and certain other individuals affiliated therewith. Hanyi has taken the position that his agency was entitled to the diverted funds, in whole or in part, as commission under separate agreements with the players, of which he refused to provide a copy.”

Finally, the investigators also state they have strong suspicions that Zhang leaked information from TSM to Han-Yu in order to facilitate his business. “Mr. Zhang may have provided Hanyi with non-public information regarding TSM’s recruiting decisions in order to benefit Hanyi and/or himself” they stated. “Typically, an esports player hires a talent agent and then the agent tries to secure employment for the player. But with respect to at least one TSM player, Hanyi was able to obtain a draft agreement TSM prepared for the player before TSM reached out to the player and he used the draft agreement to secure an agency agreement with that player, pursuant to which he receives 20% of the player’s salary.

“While we do not have conclusive evidence on this issue, Mr. Zhang’s involvement in the TSM recruiting process, his close relationship with Hanyi, and the fact that Mr. Zhang has since acted as an intermediary for the player’s commission payments to Hanyi, suggest that Mr. Zhang may have shared the draft TSM agreement and other related non-public information with Hanyi, potentially in exchange for personal benefit.”

While Zhang had maintained his position that he was simply someone trying to fulfill a difficult transition for professional players leaving China to compete in the United States and that the players would speak positively on his behalf, it certainly seems on the surface that there were a number of concerning business irregularities that were not caught early enough to prevent it impacting the players and the TSM organization itself. The statement from TSM also says they have acted to provide “resources and support” for the affected players.

Zhang himself did not cooperate with the investigation. “Between April 21, 2022, and the time of this report, the investigators made multiple attempts, via emails and phone call, to invite Mr. Zhang to an interview,” TSM’s public statement claims. “The attempts were unsuccessful as Mr. Zhang claims that his Internet and phone line were unreliable. Mr. Zhang indicated that he may be open to an interview in the future, subject to, among other things, consultation with his legal counsel. However, the investigators got the impression that Mr. Zhang was giving them the runaround.”

A spokesperson for the organization also confirmed that the matter had been referred to the FBI for investigation.

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