Gravity Co., Ltd. develops and distributes online games in many countries across the world, especially in Japan, Taiwan, and Thailand.

The original Complaint charges Gravity and certain of its officers and directors with violations of the Securities Act and the Exchange Act. Specifically, the Complaint alleges that during the Class Period, Defendants issued a Prospectus and Registration Statement in connection with the Company's IPO, and issued press releases subsequent to the IPO, which included numerous positive statements regarding demand for the Company's products and positive statements concerning the Company's growth prospects. As alleged in the Complaint, these statements were materially false and misleading because Defendants failed to disclose and/or misrepresented: (i) that the Company's core product - Ragnarok - Online which traditionally has accounted for 95% of the Company's revenue was, at the time of the IPO, suffering from declining customer demand and increased competition. In fact, contrary to the appearance of the growth presented in the Prospectus, sales of Ragnarok Online were in a material state of decline; (ii) that the Company's mobile animation business was then being negatively impacted by material adverse trends. In fact, the Company's animation business had all but disintegrated; and (iii) that the Company's royalties and license fees business was then being negatively impacted by certain material adverse trends in the Company's Chinese operations. Growth in the Company's Chinese business was one of the primary keys for the Company's future business. In fact, as portrayed in the Prospectus, China was projected to grow faster than any other country in terms of its demand for the Company's online game-related services. Though Defendants made an effort to demonstrate China's massive growth potential for online gaming demand, the fact was that the Company's Chinese business was in peril and in a state of decline - not growth.

The Complaint further alleges that on or around May 12, 2005, the Company shocked the market when it announced that its financial results for the first quarter of 2005 were lower than expected. On this news, the Company's ADSs plunged to an all time low of $5.60, a more than 70% drop from the Class Period high of $13.50 per share - the IPO price.

On December 13, 2005, the Court entered the Order signed by U.S. District Judge Loretta A. Preska consolidating all actions and appointing Pipefitters, Locals 522 & 633 Pension Trust Fund as lead Plaintiff, appointing Provost Umphrey Law Firm, L.L.P. as lead Counsel and appointing Lerach Stoia Geller Rudman & Robbins LLP as liaison Counsel. On July 11, 2006, the Plaintiffs filed a Consolidated Class Action Complaint. The Defendants responded by filing various motions to dismiss the Consolidated Class Action Complaint.

In a press release dated June 11, 2007, Gravity, an online game developer and publisher, announced that it and other Defendants have reached an agreement in principle to settle the class action litigation brought on behalf of purchasers of the Company's securities which is pending in the United States District Court for the Southern District of New York as In re Gravity Co., Ltd. Securities Litigation, No. 1:05-CV-04804-LAP. Under the proposed settlement, a fund of U.S. $10 million will be created to settle the claims of a class consisting of persons who purchased American Depository Shares of the Company during the period from February 7, 2005 through November 10, 2005, inclusive. The Company's share of the settlement fund will be U.S. $5 million. Costs of administering the settlement, as well as Plaintiffs' attorneys' fees and expenses (which have not yet been determined) will be paid out of the settlement fund before distributions are made to class members. In exchange, the Company, its current and former directors and officers as well as other third parties will be released from liability for the claims asserted by the class. … The proposed settlement is conditioned, among other things, on various conditions being met and final court approval after notice to the Plaintiff class and expiration of the time for appeal from any order of the court approving the settlement. There can be no assurance that the final settlement will be obtained.

According to a press release dated January 7, 2008, Gravity announced that the federal judge presiding over the consolidated class action entitled Blackmoss Investments Inc. vs. GRAVITY Co., Ltd., No. 1:05-CV-04804-LAP, which was pending in the United States District Court for the Southern District of New York, approved the previously disclosed settlement of the class action on November 21, 2007. In addition, no Plaintiff has filed an appeal during the 30-day time appeal period which expired on December 21, 2007. Under the terms of the settlement, a fund of $10US million will be created to settle the claims of a class consisting of persons who purchased American Depository Shares of the Company during the period from February 7, 2005 through November 10, 2005, inclusive. The Company's share of the settlement fund will be $5US million. Costs of administering the settlement, as well as Plaintiffs' attorneys' fees of 20.56% of the settlement amount and related expenses, will be paid out of the settlement fund before distributions are made to class members.