Venture-capital firms that backed “geek and gamer” subscription service Loot Crate Inc. agreed to settle a lawsuit alleging they used scripted confrontations and other hardball tactics to tighten their grip on the company, eventually pushing it into bankruptcy, WSJ Pro Bankruptcy reported. Breakwater Management LP, Upfront Ventures Management LLC and eight of their executives reached a $6.8 million settlement with creditors that lost money when Loot Crate filed for chapter 11 protection in 2019. The official committee of Loot Crate’s creditors sued the venture firms after the company’s bankruptcy, saying the firms conspired to seize control of the startup by hindering its access to alternative sources of financing. Breakwater, Upfront and their executives continue to dispute all claims made in the creditor lawsuit, according to settlement papers filed Tuesday in U.S. Bankruptcy Court in Wilmington, Del. The settlement, which requires court approval, marks a crucial step toward ending Loot Crate’s chapter 11 case, the papers said. Loot Crate’s debts included $30 million owed to trade creditors when it filed for bankruptcy. Of the proposed settlement, roughly $2.2 million will be paid to contingency lawyers for the creditors committee.
