Strauss Zelnick Lawsuit: Fraud, Harassment, and Arbitration Ruling

The Strauss Zelnick lawsuit is a California civil case filed in August 2024 by Marks Capital, Inc. and an individual plaintiff identified as “John Doe,” accusing the Take-Two Interactive chairman and CEO of fraud, California securities violations, sexual harassment, intentional infliction of emotional distress, unfair business practices, and wrongful termination. The case, filed in Los Angeles County Superior Court under case number 24STCV20137, has been stayed since February 25, 2025, while related arbitration proceedings run in Delaware.¹²

Who Sued and What They Allege

Marks Capital, Inc., a Delaware corporation, filed the original complaint on August 9, 2024, alleging fraud and violations of the California Corporate Securities Law of 1968. On September 17, 2024, the plaintiffs filed a First Amended Complaint that added B&C Retail Ventures, LLC as a co-defendant, named an individual plaintiff as “John Doe” alongside Marks Capital, and expanded the case to seven causes of action.¹

The amended complaint asserts claims for:

Violations of the California Corporate Securities Law of 1968
Fraud
Sexual harassment under California Civil Code sections 51.9 and 52
Sexual harassment under California Government Code section 12940
Intentional infliction of emotional distress
Unfair business practices under Business and Professions Code section 17200
Wrongful termination

The Business Deal Behind the Fraud Claims

The fraud and securities claims center on a joint venture involving a company called Box City, Inc. According to the complaint, Doe identified Box City as an acquisition target, and he and Zelnick formed an entity called Kairos Industries, LLC (later identified in court documents as B&C Retail Ventures, LLC) to acquire and invest in it. The plaintiffs allege that Marks Capital contributed $10 million in business assets and bank accounts for a 50% ownership interest, while Zelnick agreed to invest $10 million in cash for the other half.¹

The plaintiffs say Zelnick used this structure to gain access to Doe’s businesses and financial control over him, and that after the relationship deteriorated, Zelnick seized “complete control and ownership” of the company and its assets, froze Doe out of the business, and had him fired.¹

The Harassment and Retaliation Allegations

The amended complaint describes what the plaintiff characterizes as a pattern of predatory sexual behavior by Zelnick, growing out of what began as a mentor-mentee relationship between the two men. According to the filing, Zelnick repeatedly invited Doe to his hotel room to shower, and on at least one occasion walked into a private bathroom while Doe was showering, stared at his body, and rubbed lotion on himself. The complaint further alleges that Zelnick repeatedly disrobed and exposed himself to Doe without warning and sent “scores of unsolicited text messages” containing half-naked photos of himself.¹

During a September 2022 FaceTime call, according to the complaint, Zelnick threatened that “bad things could happen” if Doe did not comply with his sexual overtures. The plaintiffs allege that when Doe refused an invitation to a private Caribbean retreat, Zelnick retaliated by firing him, taking control of his business assets, and freezing him out of his security interests in the venture.¹

Zelnick’s Response and the Arbitration Ruling

Zelnick, represented by Kelley Drye & Warren, LLP, has denied the allegations. On November 12, 2024, the defense moved to stay the California proceedings pending arbitration, or in the alternative to compel arbitration, arguing that certain claims overlapped with issues already subject to an arbitration mandate from the Delaware Court of Chancery.²

On February 25, 2025, Judge Peter A. Hernandez granted the motion and stayed the entire action pending arbitration. The court found that the business fraud claims contained issues subject to the existing arbitration mandate. The court also addressed the federal Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, concluding it did not apply because there was no predispute arbitration agreement between Zelnick and the plaintiffs that would trigger the law’s protections.¹

Zelnick has also gone on offense in the arbitration forum. On February 20, 2025, he commenced his own arbitration proceeding against the plaintiffs, seeking a declaration that he “did not commit the wrongdoings he is accused of in this action.” Separate arbitration proceedings had already been initiated on January 15, 2025, by the corporate entities B&C Retail Ventures, LLC and B&C SMB, LP.¹

Where the Case Stands Now

The plaintiffs asked the court to reconsider the stay; that motion was denied on April 28, 2025. A defense motion for sanctions was denied on February 5, 2026. The defendants also filed an opposition to a plaintiff request for a “stay-away order” in February 2026, though the outcome of that particular motion is not reflected in the available records.¹

The case is open and stayed. A status conference on the arbitration is scheduled for September 16, 2026, in Department 408 at the Stanley Mosk Courthouse in Los Angeles.¹

1
UniCourt. Marks Capital Inc v. Harry Strauss Zelnick
2
Rulings.law. Case 24STCV20137 Ruling