iam8bit filed a lawsuit in Los Angeles Superior Court on December 4, 2025 accusing Skybound Game Studios of fraud, breach of contract, theft of trade secrets, conversion, unjust enrichment, and misappropriation. The indie game producer and merchandise company alleges that Skybound engaged in a multi-year accounting scheme after their April 2021 partnership began, failing to provide accurate monthly financial reports and inflating expenses with millions of dollars in fake line items that even a third-party auditor couldn’t verify. iam8bit is seeking over $4 million in damages related to the accounting fraud alone, plus additional compensation for being cut out of the Stray Nintendo Switch launch after creating promotional materials for the game’s PlayStation and Xbox releases. The lawsuit claims Skybound used iam8bit’s trade secrets and confidential information about their royalty arrangements with Annapurna Interactive to negotiate the Nintendo deal independently, then used almost exact copies of iam8bit’s creative work for marketing.
The Partnership That Went Wrong
iam8bit operates as both a video game producer and merchandise company, known for selling vinyl soundtracks, collectibles, and geek gear alongside developing indie titles. The company entered into a partnership with Skybound Game Studios in April 2021, likely involving publishing agreements, marketing collaboration, and revenue sharing on various projects. Skybound Game Studios is the gaming division of Skybound Entertainment, the company founded by Walking Dead creator Robert Kirkman that publishes games based on their properties and partners with indie developers.
According to the Los Angeles Superior Court complaint, problems began almost immediately after the partnership formed. iam8bit alleges that Skybound failed to provide the monthly financial reports as agreed, then padded its expenses with millions of dollars in fake line items when reports were eventually delivered. These fabricated expenses would directly reduce the profits iam8bit was entitled to receive under their partnership agreement, effectively stealing money by making it appear that costs were higher than reality. The complaint states that Skybound has not clarified these suspicious line items even when questioned by a third-party auditor that iam8bit hired to investigate the discrepancies.
The Stray Nintendo Switch Betrayal
Beyond the accounting fraud allegations, iam8bit accuses Skybound of cutting them out of a lucrative deal involving the indie hit game Stray. The cat adventure game developed by BlueTwelve Studio and published by Annapurna Interactive became a surprise success when it launched on PlayStation and PC in July 2022, selling over 1 million copies in its first two months. According to iam8bit’s legal representatives, the company was responsible for designing and developing promotional content for Stray’s launch on PlayStation and Xbox platforms as part of their partnership with Skybound.
The lawsuit contends that Skybound misappropriated trade secrets from iam8bit to secure its own agreement for the Nintendo Switch release of Stray without including their partner. Specifically, the complaint alleges that Skybound exploited confidential information regarding iam8bit’s royalty arrangements with publisher Annapurna Interactive to negotiate favorable terms for themselves while sidelining the company that created the original promotional materials. Adding insult to injury, iam8bit claims Skybound used almost exact copies of iam8bit’s creative work for marketing the Nintendo Switch version, essentially stealing their designs after cutting them out of the profits.
What iam8bit Is Seeking
The full list of allegations in iam8bit’s complaint includes breach of contract, fraud, conversion, unjust enrichment, and misappropriation. The company’s legal team is seeking monetary damages exceeding $4 million related to the accounting scheme issues, plus additional unspecified damages for being excluded from the Stray Nintendo deal and having their creative work stolen. iam8bit is also requesting punitive damages intended to punish Skybound for allegedly intentional misconduct, plus attorneys’ fees to compensate for the cost of pursuing legal action.
Punitive damages in cases involving fraud can significantly exceed compensatory damages when courts determine that defendants acted with malice, fraud, or oppression. If iam8bit can prove that Skybound deliberately engaged in a multi-year accounting scheme and intentionally stole trade secrets to exclude a business partner, punitive damages could multiply the final judgment considerably beyond the $4 million baseline. The request for attorneys’ fees is standard in business litigation involving breach of contract and fraud claims, ensuring that successful plaintiffs recover the costs of enforcing their rights.
What This Means for Indie Publishing
This lawsuit highlights ongoing power imbalances in indie game publishing relationships, where smaller developers and service providers often lack leverage to enforce contract terms when larger publishers decide to act in bad faith. iam8bit’s allegations paint a picture of systemic misconduct spanning years, suggesting that Skybound felt comfortable manipulating financial reports and stealing intellectual property because they believed their partner couldn’t effectively fight back. The fact that even a third-party auditor couldn’t get explanations for suspicious line items indicates potential obstruction beyond simple accounting errors.
The Stray situation is particularly troubling because it suggests Skybound weaponized confidential business information shared in good faith during a partnership to compete against that same partner. If the allegations are true, Skybound learned iam8bit’s negotiating position with Annapurna Interactive, then used that insider knowledge to negotiate their own exclusive deal while cutting out the company that created the promotional materials Skybound later copied. This kind of betrayal erodes trust in publisher partnerships and makes indie creators rightfully paranoid about sharing information with business partners.
Skybound’s Response
As of December 6, 2025, Skybound Game Studios has not publicly responded to the lawsuit allegations. The company will need to file a formal response in Los Angeles Superior Court within the timeframe specified by California civil procedure rules, typically 30 days after being served with the complaint. Skybound’s legal team will likely either deny the allegations entirely, claim that accounting discrepancies resulted from legitimate business expenses rather than fraud, or potentially settle the case out of court to avoid protracted litigation and negative publicity.
Given that Skybound is owned by Robert Kirkman’s larger Skybound Entertainment empire, the company has significant financial resources to fight the lawsuit if they believe iam8bit’s claims are unfounded. However, the specificity of iam8bit’s allegations, particularly regarding the Stray Nintendo deal and the use of almost exact copies of their creative work, suggests the plaintiff has concrete evidence to support their claims rather than making vague accusations. Whether this case goes to trial or settles privately will depend on what discovery reveals about Skybound’s financial records and internal communications regarding the Nintendo Switch launch.
FAQs
Why is iam8bit suing Skybound Game Studios?
iam8bit is suing Skybound for fraud, breach of contract, and theft of trade secrets, alleging Skybound engaged in a multi-year accounting scheme with fake expenses, cut iam8bit out of the Stray Nintendo deal, and copied their promotional designs.
How much is iam8bit seeking in damages?
iam8bit is seeking over $4 million in damages related to accounting fraud, plus additional unspecified damages for being excluded from the Stray Nintendo deal, punitive damages for intentional misconduct, and attorneys’ fees.
What is iam8bit?
iam8bit is a video game producer and merchandise company that sells vinyl soundtracks, collectibles, and gaming gear while also developing and publishing indie titles. They entered into a partnership with Skybound Game Studios in April 2021.
What is Stray and why is it part of the lawsuit?
Stray is an indie cat adventure game that became a surprise hit. iam8bit claims they designed promotional materials for Stray’s PlayStation and Xbox launches, then Skybound used their trade secrets to negotiate a separate Nintendo deal, cutting iam8bit out while copying their designs.
What does Skybound Game Studios do?
Skybound Game Studios is the gaming division of Skybound Entertainment, founded by Walking Dead creator Robert Kirkman. They publish games based on Skybound properties and partner with indie developers on various projects.
Has Skybound responded to the lawsuit?
As of December 6, 2025, Skybound Game Studios has not publicly responded to iam8bit’s lawsuit allegations. They will need to file a formal legal response within approximately 30 days according to California civil procedure rules.
What are fake line items in accounting?
Fake line items are fabricated expenses added to financial reports to inflate costs and reduce reported profits. iam8bit alleges Skybound padded expenses with millions in fake line items that couldn’t be verified even by third-party auditors.
Conclusion
The iam8bit versus Skybound Game Studios lawsuit exposes the ugly reality of what can happen when indie partnerships go wrong and larger companies allegedly abuse their power. If iam8bit’s allegations prove true in court, this case represents not just fraud and breach of contract but a systematic betrayal where Skybound weaponized confidential information shared during a business partnership to compete against and exclude the very partner who trusted them. The fact that accounting discrepancies allegedly spanned years suggests either stunning incompetence or deliberate theft dressed up as business expenses. The Stray situation adds another layer of betrayal, where iam8bit claims they created promotional work only to be cut out of the lucrative Nintendo deal while watching Skybound copy their designs. Whether this lawsuit results in a massive judgment, a quiet settlement, or vindication for Skybound depends on what evidence emerges during discovery, but the allegations alone should make indie creators think twice about sharing sensitive business information with publishing partners who might use that knowledge against them.