To shed some more light on this... Rocket company is indeed officially gone, along with Delta-Arts, the company that was developing the recent Medarot RPGs for them. These blog posts sum up the situation pretty well:
https://projectrisingbeetle.wordpress.com/2016/05/02/medarot-rpg-developer-delta-arts-has-closed/
https://projectrisingbeetle.wordpress.com/2016/05/15/imagineer-absorbs-rocket-company/
The press release specifically mentioned them transferring ownership of Medarot, but no mention of Telefang. :/ They never made any references to Telefang
ever though, so it's not really surprising.
As for the Smilesoft president's arrest... I don't have any doubts that it's true, but it does look like the news articles related to it have completely fallen off the internet (it was 2003 after all). The first place I saw it was on a Japanese Medarot fansite in 2009, which hosted a backup of the (then gone) news article from the Mainichi Shimbun website for proof... Said page on the fansite never got archive-crawled before it died though, so it's long gone now.
Further searching leads me to
this Japanese blog post from 2007 where the author talks about boycotting one of Rocket Company's kanji study games because of it. The bold text is apparently taken straight from the print news article from Mainichi Shimbun via a newspaper database, but the blog author admits that they don't have the original source to confirm it. I also found a different
blog post with some 2ch posts at the top discussing the arrest. One of the posters pasted the text from the same article, so that's two places referencing it at least.
Basically, the article says that Iida Shuuhei, president of the game company "Smilesoft", was arrested for engaging in prostitution with a 15 year old girl who he met on an online dating site. Apparently he was "dating with compensation" by paying her ~$500 in addition to gifts such as a cellphone, and a hotel was involved. (Yikes.)
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