Former executives of Edgio Inc. will pay $15 million to shareholders to end claims that the executives misled investors about Edgio's control over its internal financial reporting in the months leading up to the bankrupt software company's admission that it overreported revenue.

The settlement fund represents about 10% of the maximum reasonably recoverable damages, which is the upper end of any "range of reasonableness" based on comparison to similar suits, according to a motion for preliminary approval filed Wednesday in Arizona federal court. The motion also requests that the court certify a class for the purposes of the settlement and appoint lead plaintiff Peter Frouws as class representative.

Lead counsel will request up to one-third of the settlement amount, or approximately $5 million, in fees and "reasonable" litigation expenses, according to the attached notice.

The parties said they reached an agreement to settle following a full-day mediation session in September, subsequent discussions and a double-blind proposal from the mediator.

According to the motion, Edgio was dismissed as a defendant in the action after filing for Chapter 11 bankruptcy in 2024.

If approved, the settlement would end claims that former Edgio executives, including ex-CEO Robert Lyons and former Chief Financial Officers Daniel Boncel and Stephen Cumming, made misleading statements about the state of Edgio's internal controls and performance.

According to the complaint, Edgio offered its content delivery network Open Edge to several internet service providers.

The truth about Edgio's finances began to emerge, the suit alleged, in April 2022 when Edgio released its quarterly financial results. Although the company's results were ahead of analyst expectations, at least one prominent analyst noted that the quarter was the first "with a fully staffed sales team, which should yield more positive results."

Then, in March 2023, Edgio revealed that it would need to refile full-year financial statements for 2020 and 2021, as well as each individual quarter of 2021 and 2022, because it had "identified an error in the company's historic accounting treatment of Edgio's Open Edge solution."

Edgio reported that full-year revenues for 2021 and 2020 would be reduced by 7.7% and 2.9%, respectively, according to the complaint. Additionally, Edgio revealed it was still evaluating the financial impact of the accounting error and would not file its 2022 annual report on time.

On this news, the company's share price fell about 16 cents, or 15.5%, to close at approximately 87 cents per share on March 13.

"When Edgio's 2022 Form 10-K was finally filed on June 29, 2023, it revealed that Edgio's revenue had been overstated by $6.2 million in [fiscal year] 2020, $16.5 million in FY 2021 and $23.7 million for the nine months ended Sept. 30, 2022," the complaint stated.

The suit accused the defendants of violations of the Exchange Act.

Representatives of the parties did not immediately respond to requests for comment on Thursday.

The proposed class is represented by Karolina Klyuchnikova, William C. Fredericks, Thomas L. Laughlin IV and Cornelia Gordon of Scott + Scott Attorneys at Law LLP, and Brian Schall and Brian R. England of The Schall Law Firm.

The Edgio defendants are represented by Scott B. Luftglass and Michael P. Sternheim of Fried Frank Harris Shriver & Jacobson LLP, and David B. Rosenbaum and Joseph N. Roth of Osborn Maledon PA.

The case is Frouws et al. v. Edgio Incorporated et al., case number 2:23-cv-00691, in the U.S. District Court for the District of Arizona.