Creditors who lost money on Loot Crate Inc. say venture-capital investors used hardball tactics, such as acting out scripted confrontations, to tighten their grip on the company, making moves that eventually pushed it into bankruptcy, according to court documents, WSJ Pro Bankruptcy reported. Loot Crate, which markets itself as a subscription service for “gamers and nerds,” filed for chapter 11 last year. A lawsuit filed by the Loot Crate creditors in bankruptcy court last week contains excerpts of emails involving executives at investors Upfront Ventures and Breakwater Management LP. The suit alleges the venture-capital firms used a playbook they created, as well as acting advice from a law firm, to use during boardroom negotiations with Loot Crate management. The investment firms also threatened to pressure Loot Crate co-founder Christopher Davis through his father, a Fortune 500 executive, according to an email cited in the lawsuit. Loot Crate raised $18.5 million in 2016 from investors including Upfront, Breakwater and Robert Downey Jr.’s venture-capital firm, Downey Ventures, which isn’t named in the complaint. Loot Crate owed more than $50 million to creditors when it filed for bankruptcy. A committee of unsecured creditors, including Major League Baseball, is seeking compensation of at least $10 million for the loss of value surrounding Loot Crate.
