Thread by @dsmart

1/ A new development in the Crytek v CIG lawsuit.

Back on Dec 6th, 2018, the judge had ruled overwhelmingly in favor of CIG as to their response to the Second Amended Complaint filed by Crytek.

You can read that order here:

docdroid.net/Jv5BRif/031129…

2/ The judge's decision was based on notes in her previous Aug 14, 2018 ruling in which she issued a 2/7 ruling in favor of Crytek's First Amended Complaint which was the crux of the entire lawsuit.

You can read that order here:

docdroid.net/K7ugdJo/crytek…

3/ In her Dec ruling which was based on a single section 2.4 dispute, she had given Crytek leave to amend their complaint and file a third amendment in support of their claims that CIG was effectively engaged in advertising their own engine in violation of the agreement.

However, shortly before their time to take her up on their offer expired, Crytek asked the court for additional time to file a response - if any.

I cover all of that in this thread:

https://twitter.com/dsmart/status/1077210969984696320

5/ In their Dec 21 filing, among other reasons, Crytek cited the holiday period as a reason for delays etc.

You can read that here:

docdroid.net/5iiTOHk/031129…

6/ At the time, some of us had opined that Crytek would have needed to cite additional incidents (e.g. the Lumberyard logo being displayed in the game's opening screen and other places) as evidence of CIG doing some or all of the things cited in Section 2.4 of the agreement.

7/ But last evening, Crytek opted not to file a third amendment, but instead has decided to move forward with discovery - which Crytek can no longer avoid nor delay.

You can read the filing here:

docdroid.net/o9vH8px/govusc…

8/ So this basically means that the causes of action which survived the Aug 2018 motion to dismiss, are now headed to trial after discovery concludes (expected to be later this year)

i.imgur.com/LBjig3J.png

9/ This basically means that CIG is now headed to trail for two serious counts which have traditionally led to massive damages in lawsuits, and in some cases companies going bankrupt.

1) Breach of contract

2) Copyright infringement

10/ And as a bonus, they still have Ortwin, attorney and co-creator of the project, and officer of all the companies, still on the liability hook for his involvement in the construction of the licensing agreement which has led to this legal spat.

11/ Since I started covering this lawsuit back in 2018 after I broke the news of its existence, I have always stated that the way these things go generally leads to new causes of action and interesting things being uncovered during discovery.

12/ The MtD filing by CIG was basically a given. But then they later petitioned the judge to halt discovery until she ruled on the MtD. She didn't rule until Aug 2018. And it wasn't at all in their favor.

Now the cows have come home - and it's discovery time.

13/ That Crytek decided to just go to discovery, rather then spend another 2-3 months waiting for a ruling on a third amended complaint, tells me that their strategy is to go to discovery, and see if they can uncover materials which would not only support the 2.4 claims...

14/ ...but which would also perhaps lead to them uncovering other things which would then give rise and support for a third amended complaint down the road.

This happens frequently btw. Which is why discovery is the single most disastrous and intrusive part of any lawsuit.

15/ The biggest risk here for CIG now is that not only does Crytek now have a plausible reason to get access to their financials (probably under seal), but it's also going to provide a third-party with a LOT more insight into how $200M+ of backer money came and went.

16/ And it really doesn't matter if that info is never made public. What matters is that a hostile third-party would now have access to it.

And it's likely to leak.

17/ If you saw my coverage of the financial brochure (it's not a financial statement, that would be weird for CIG) from last month, then you already have an idea where I'm going with this.

dereksmart.com/2018/12/star-c…

18/ Not did the public facing financial brochure show that CIG was burning more money than they were raising, it also showed that not only were they basically insolvent at moments in time, but that they couldn't have even been considered an accounting going concern.

19/ There is a reason why when you look at the financial statements of public videogame companies (e.g. EA, Activision, Take Two, Frontier UK etc), you get to see everything related to their income and liabilities - including cash basis, balance sheets etc. That's standard.

20/ What CIG did in Dec was pull numbers out of their financials, and made colorful charts to satisfy the gullible backers who don't know any better. I can pretty much guarantee that if they released proper financials, we'd see that they were operating in Red for months on end.

21/ Thing is, normally nobody would care about their finances. Except that this is all money given by trusting backers who not only have no idea what happened to it, but who, after 7 years, still don't have a SINGLE one of the two games they forked out over $200M for.

22/ And creative accounting isn't even new. To the extent that there are hundreds of guidelines and articles about it, what to look for etc. I mean scroll to the bottom of this one for starters. See if anything about Star Citizen rings a bell.

investopedia.com/articles/funda…

23/ While the financials released by CIG shows the extent to which they were in financial distress, it also shows that they had even earned and spent over $30M more than was previously reported and made public. That should have been an even bigger Red flag.

24/ Yet, even as I spent years writing that there was no way in hell that public funding chart was accurate, some just discarded it as hyperbole.

But here's the thing. They had and still have investors who never had insight to the financials. I know two of them.

25/ And the reason is that those weren't your traditional investors who would want to see numbers on paper. I have absolutely no idea how they ended up giving Chris Roberts money purely on who he was, the popularity of Star Citizen etc.

26/ As a Star Citizen backer once said, even snake oil salesmen tend to actually have snake oil :)

27/ Now that they have accredited off-shore investors who gave them a $46M bailout investment in May 2018, it is highly unlikely that they would publicly release inaccurate numbers; thus leaving themselves at huge risk of legal ramifications down the road.

28/ So while the numbers appear to be accurate while painting a more dire picture than was previously unknown, they still don't give the full picture as to how bad things really were. Why? Because they didn't include important data such as liabilities, balance sheet etc

29/ What they did is akin to you applying for a bank loan and being required to list your income & expenses. Do you give ballpark figures or attach your bank account statement showing how much you spend each month on Porn Hub?

30/ These are some of the details that Crytek is now likely to have access to. And while they're not acting obo of backers and so aren't likely to push for public disclosure if CIG tries to file accounts under seal, they are still a hostile third-party.

31/ If Crytek prevails, not only does it put them in a position to have the court pull the CryEngine license, but they could also issue an injunction, require legal certification and software audit that CIG no longer uses CryEngine etc. Really, truly, bad stuff.

32/ In anticipation of the "but they're not using CryEngine, they switched to Lumberyard" posts, I can safely say that CIG is still in fact using CryEngine; and they currently have the rights to do because the license agreement is still valid.

33/ Any dev with access to CryEngine, Lumberyard, and a copy of Star Citizen would be able to prove this inside of 30 mins. If you recall my thread from back when I was discussing their generous use of cycle-hogging spinlocks, well, you've been paying attention. :)

34/ In just the past few days Bethesda settled a lawsuit against Behavior and Warner Bros over the Westworld mobile game. That lawsuit has just been settled - and the game has now gone offline completely.

35/ In that lawsuit, Bethesda only had to show that code they paid for was used in Westworld. And hilariously one of the key points was the presence of bugs in both Fallout Shelter and Westworld mobile. So yes, there are so many ways to determine these things.

36/ That's where the lawsuit is now. As they go into discovery, my guess is that nothing interesting is likely to happen until either things start showing up in public discovery or they start fighting over the scope & release of certain discovery items. Unless they settle.

{end}

ps. I forgot to mention that they have now filed a correction in the UK to show "Infatrade" as the actual named entity in the $46M bailout. I guess they're reading my feed? 🤣

https://twitter.com/dsmart/status/1073032287221153793

You can read the corrected confirmation statement at the link below.

beta.companieshouse.gov.uk/company/088152…