Grabar Law Office is investigating claims on behalf of shareholders of Kartoon Studious Inc. (NYSE: TOON) f/k/a Genius Brands International, Inc. (NASDAQ: GNUS). The investigation concerns whether certain officers and directors breached the fiduciary duties they owed to the company.

Genius Brands International, Inc. was a multimedia company that licenses entertainment content for children. The Company has since changed its name to Kartoon Studios Inc., and its securities now trade on the American Stock Exchange under the ticker symbol “TOON.”

On August 5, 2025, allegations made in a federal securities fraud class action complaint against Genius Brands, now known as Kartoon Studious Inc. (NYSE: TOON) partially survived a motion to dismiss.

The underlying Complaint alleges that throughout the Class Period, Kartoon Studious Inc. (AMEX: TOON) f/k/a Genius Brands International, Inc. (NASDAQ: GNUS) made false and/or misleading statements regarding: (i) Nickelodeon’s purported broadcast expansion of Genius’s Rainbow Rangers cartoon; (ii) subscription fees for the Kartoon Channel!; and (iii) the Company’s growth potential and overall prospects as a company. The Complaint further alleges that while the share price of Genius stock was artificially inflated due to these misstatements.

Specifically, Plaintiffs allege Genius, facing imminent delisting, retained stock promoter PennyStocks.com (PennyStocks) to publish favorable articles about the Company to boost the price of its shares so that it could come back into compliance with NASDAQ rules. Plaintiffs allege Genius went on to make a series of materially false or misleading statements about the Company’s business prospects and operations, artificially inflating the price of its securities. First, Genius issued a press release on March 17 announcing that Nickelodeon “again increased the broadcast of the Company’s hit original preschool series, Rainbow Rangers, to 26 airings per week.” But the truth was far less favorable—Rainbow Rangers was airing only 12 to 14 times per week. Then, in the Securities Purchase Agreement (SPA) for a May 7, 2020, direct offering of Genius shares, the Company represented that it had not hired anyone to solicit purchases of its securities, failing to disclose its relationship with PennyStocks.

Next, a June 22, 2020, post on Genius’s Twitter account linked to an article published a day earlier by Insider Financial that “speculated that Disney or Netflix would buy Genius” and asserted: “We believe it’s only a matter of time before Disney or Netflix buys Genius Brands International.” Then, on July 2, Heyward, Genius’s founder and CEO, announced that Genius planned to reveal a “key business development update” on July 6, triggering some online speculation that the update would concern an acquisition of the Company by Disney or Netflix. Id. ¶¶ 96-97. But the July 6 update did not ultimately concern an acquisition, and Genius instead announced it would be entering into a “joint venture with POW! Entertainment regarding the purported intellectual property that Stan Lee created after his time with Marvel Entertainment[,]” including more than 100 original properties (the Stan Lee Universe). The next day, Genius received a letter from a law firm claiming that the Stan Lee Universe had already been sold to a company called Proxima Studios and alleging Genius was interfering with Proxima’s contractual rights to that intellectual property. Genius did not publicly disclose the letter, or any other risks regarding its rights to the Stan Lee Universe, until March 30, 2021, when Genius issued a press release that “impliedly admitted that [it] did not control the same breadth of [intellectual property] that it” had represented in the July 6 announcement.

On appeal from the Court’s order granting Defendants’ motion to dismiss Plaintiffs’ second amended complaint (SAC), the Ninth Circuit found that Plaintiffs plausibly alleged that “Genius’s representations regarding PennyStocks in its May 7 SPA were misleading, and Genius’s statements regarding Rainbow Rangers, Disney/Netflix, and Stan Lee caused [Plaintiffs’] losses.” In re Genius Brands Int’l, Inc. Sec. Litig. (Genius II), 97 F.4th 1171, 1190 (9th Cir. 2024).

The district court then determined that “Plaintiffs’ claims under Rule 10b-5(a) and (c) and under § 20(a) of the Exchange Act are adequately alleged as to the Rainbow Rangers statements.”

WHAT YOU CAN DO NOW: If you purchased Kartoon Studious Inc. (NYSE: TOON) f/k/a Genius Brands International, Inc. (NASDAQ: GNUS) shares prior to March 11, 2020, and still hold shares today, you are encouraged to contact Joshua Grabar at jgrabar@grabarlaw.com, or call 267-507-6085.  You can seek corporate reforms, the return of funds back to the company, and a court approved incentive award at no cost to you whatsoever.