Game On: The downward spiral of Yuji Naka, Sonic the Hedgehog co-creator arrested for insider trading

On Nov. 17, 57-year-old Yuji Naka, the lead programmer for the original Sonic the Hedgehog, NiGHTS into Dreams, numerous Phantasy Star titles and more, was arrested by the Tokyo District Public Prosecutors Office and charged with violating the Financial Instruments and Exchange Act of 2006. Naka is accused of insider trading related to non-public information about the 2020 mobile game Dragon Quest Tact, having allegedly bought 10,000 shares of the developer Aiming before information was made public. He stood to profit $20,000 from flipping the shares.

Although Naka suddenly and dramatically resigned from Sega in 2006, his legacy at the company has persisted. Many for decades have called him “the father of Sonic,” despite it being well-documented that the hedgehog had many co-creators. Naka was a genius programmer in his heyday, creating excellent game engines from scratch using assembly.

Accordingly, many have been shocked to see Naka’s legacy tainted in such a way. I’m admittedly surprised to see him arrested, but as someone who’s been following the programmer’s career for a long time, I’m unsurprised that karma has finally caught up to him. His list of game industry sins is a long one.

Naka had enough goodwill with Sega by 1994 to pursue his passion project, so Sega put the fate of the blue hedgehog in the hands of other developers while Sonic Team, led by Naka, created NiGHTS into Dreams. The formidable task of creating Sonic X-Treme, the mascot’s ambitious debut on the brand-new Saturn console – Sega’s PlayStation and Nintendo 64 competitor – went to Sega Technical Institute.

That game’s development floundered about while the team struggled with mismanagement, high turnover and all manner of development hell. With the Saturn being notoriously difficult to program for, producer Mike Wallis eventually asked Sega executive vice president Bernie Stolar for the source code to NiGHTS, which was coming along nicely. Stolar obliged.

When Naka caught wind of it weeks later, he threatened to quit Sega if anyone else used “his” engine. A couple of months later, Sonic X-Treme was canceled entirely. It was likely doomed either way, but I have a hard time believing the game engine Naka programmed on company time truly belonged to him and not Sega. Further, its usage by another team wouldn’t have taken away from NiGHTS in any way.

In 1998, Naka and his team flew to Sega of America to get hands-on with a promising would-be launch title for the Sega Dreamcast, Geist Force. Unaware that anyone else in the room spoke Japanese, Naka right then and there began scheming of a way to gut the development team and instead implement their impressive 3D engine into the next Sonic game. Several vital employees resigned in response, and the game was canceled entirely. Smooth.

Naka has also displayed a penchant for disavowing anyone close to Sonic who eventually moved on from Sega. When Hirokazu Yasuhara, a director and game designer for numerous Sonic games, jumped ship to Sony to work on Jak II in 2003, Naka – totally unprompted – referred to him as “quite useless” in an interview with Euro Gamer. After leaving Sega in 1999, Naoto Ohshima’s name was curiously removed from the credits of 2003’s Sonic Adventure DX Director’s Cut despite his considerable presence in the 1998 original.

In July, Naka shared a photo on Twitter of Sonic Team publicly unveiling NiGHTS into Dreams 26 years prior. He intentionally blacked-out the entire body of Ohshima, who played no small part as the director and character designer. What followed was a justified barrage of angst from Twitter users who questioned Naka’s pettiness.

His justification, of course, was that he was angry over being ousted from the development of 2021’s Balan Wonderworld months before its release. Given Ohshima has a squeaky-clean record, tolerated working with Naka on and off on video games for almost 30 years and nevertheless convinced Square Enix to fire Balan Wonderworld’s director months before its release – I’m inclined to think Ohshima had good reasons.

Filing a wrongful termination lawsuit against Square Enix before abusing insider knowledge to trade stocks seem to be the man’s attempts to “get even” with the company. He characterized Balan Wonderworld as his “one chance” with Square Enix and talked about retiring from the gaming industry altogether after its commercial and critical failure. If Naka stays behind bars, he may not have much choice.