Fat Brands has reached an agreement in principle to settle a consolidated securities class action lawsuit filed by shareholders against the company and some current and former officers and directors, according to a press release. 

Following a voluntary mediation process, Fat agreed to provide a cash payment of $2.5 million and an issuance of $500,000 in Class A common stock to impacted shareholders to settle the suit. 

The class action lawsuit was filed in April after a February Los Angeles Times report revealed CEO Andy Weiderhorn and his son Thayer Weiderhorn, COO of Fat Brands, were under federal investigation for alleged violations including possible money laundering, fraud and misrepresentations to investors. 

Following this news, stock prices fell sharply after high trading volume in the first two months of the year. Specifically, Common A stock prices were at $10.56 per share on Feb. 18 and fell to $7.51 per share by Feb. 25. The lawsuit, which was filed on behalf of people who purchased stocks between Dec. 4, 2017 and Feb. 18, 2022, alleged that the declines in stock prices damaged investors. 

The lawsuit also alleged the company made false or misleading statements because it “misrepresented and failed to disclose” various facts related to the reported investigation into the CEO and COO. 

Pending court approval of the settlement, Fat expects this litigation to be dismissed with prejudice, meaning the plaintiffs cannot refile the same claim again in court.

Fat said it continues to deny any liability and that “eliminating the distraction, expense and risk of continued litigation is in the best interests of the Company and its stockholders,” according to the press release.