Sonic the Hedgehog co-creator may face jail over alleged insider trading

One of Sonic the Hedgehog’s creators is facing possible jail time and a fine of close to £1m for his alleged part in an insider trading scheme, according to a court report by Japanese media.

Yuji Naka, who co-created Sega’s blue-spiked mascot, was arrested in November last year over allegations he traded in stock with privileged information for a significant profit.

The 57-year-old game developer was accused of illegally buying tens of thousands of shares in two video game companies based on information that they were soon to announce deals over new games that would bump up their valuation.

On Thursday, the Abema Times reported that prosecutors were seeking two years and six months and fines of ¥172.5m (£990,000), telling the Tokyo district court that Naka “abused his authority to view materials and collect information” and that “the crime was committed based on strong criminal intent, which is malicious”. They said Naka had shown no remorse.

The Abema Times quoted Naka’s lawyer as demanding a reduction in the fine and a suspended sentence on the grounds that “information that was extremely unrelated to his duties was mistakenly sent to him and he happened to see it”.

Naka was quoted as saying he regretted “undermining the fairness, soundness and credibility of the market”. “I apologise for that,” he said.

Sega released Sonic the Hedgehog at the beginning of the 1990s in an attempt to compete with Nintendo’s Italian plumber, Mario, who had helped it dominate the industry for years.

Naka has said Sonic was originally conceived as a high-speed rabbit, but the idea of a hedgehog came from a desire to have him spin in a ball when attacking enemies. “We thought it would be better to have some animal with a hard shell or spines,” he said in a 2001 interview.

He left Sega in 2006, long after Sonic propelled the company to a huge global franchise, which has continued with feature films grossing hundreds of millions of dollars. Naka also led development on Sega’s Nights Into Dreams and Phantasy Star Online series in the late 1990s, before ascending to a production role.

After heading up his own studio, Prope, Naka eventually joined Square Enix, where he developed another fictional character – a top hat-wearing character called Balan. However, the resulting game, Balan Wonderworld, received largely negative reviews and Naka left the company in 2021.

In March, the Japanese public broadcaster NHK reported that Naka had “admitted the charges against him, stating that there was ‘no doubt’”.

According to charges, he bought a total of 130,000 shares in Ateam and Aiming before they announced two partnerships with Square Enix for the mobile games Final Fantasy 7: The First Soldier and Dragon Quest Tact.

It is alleged that he earned a profit on the sale of more than ¥20m.

A judgment is expected to be announced on 7 July, the Abema Times reported.