Merchandise specialist iam8bit is suing publisher Skybound Games over claims of fraud and breach of contract.

In a lawsuit filed with the Superior Court of the State of California, County of Los Angeles, iam8bit has accused Skybound of conducting a “multi-year accounting scheme” in which it failed to provide accurate financial reports.

“Skybound failed to provide the monthly reports as agreed,” iam8bit’s lawyers wrote in its court filing.

“It also padded its expenses with millions of dollars in fake line items.”

Iam8bit claims that Skybound has not explained many of its expense items and brought in a third-party auditor to look into the matter. The company says that this has cost it $4 million.

iam8bit also claims that Skybound interfered a deal related to the indie hit Stray. The company says that Skybound used confidential information about iam8bit’s royalties with the game’s publisher Annapurna to cut it out of the deal ahead of the title’s Nintendo Switch release. Furthermore, iam8bit says that Skybound used “almost exact copies” of its marketing creative.

“Unbeknownst to iam8bit, Skybound went behind iam8bit’s back and entered into an agreement with Annapurna in connection with a new version of Stray for the Nintendo Switch platform,” reads iam8bit’s suit, per Law360. “Skybound concealed this deal from iam8bit. At all relevant times, Skybound concealed and misrepresented its intention to solicit Annapurna as a client and to misappropriate iam8bit’s work.”

iam8bit and Skybound Games Studios first started working together in April 2021 in a partnership that would see the two companies collaborate to make physical versions of indie games.

iam8bit is a merchandise specialist which has been around since 2005 and is best known for selling video game soundtrack vinyls, in addition to T-shirts, art and other physical goods. The firm has also operated the Play Days live event element of Geoff Keighley’s Summer Game Fest since 2022, and launched its iam8bit Presents publishing label in the same year.

Skybound Games Studio is the games arm of Skybound Entertainment, created by The Walking Dead creator Robert Kirkman, which recently became Paramount Skybound following the purchase of Paramount Pictures. That company is currently mounting a hostile takeover of Warner Bros, including its game studios.

GamesIndustry.biz has reached out to Skybound Games Studios for comment.