As I heard it, the fact that they were heavily implying (and often delivering) versions of the emulator that worked with as yet unreleased games for Patreon backers exclusively while the ‘open to everyone’ version was not as compatible, is what probably did them in.
It would have been pretty hard for them to argue that their emulator was for legal means when they were constantly telling people to pay up for the Patreon to get access to builds optimized for games that hadn’t yet gone on sale. If they had just kept the public in parity with the Patreon and just coincidentally had performance uplifts on upcoming games before they dropped, they’d probably have been fine. As it is, they painted a pretty compelling picture that they were “pay for piracy” and that’s where the lawyers probably told them to take a deal and get out.
It’s was naive of them to think they could get away with making optimizations for games that haven’t been released yet as long as it’s behind a paywall. As if Nintendo didn’t make a Patreon account and sub to them to collect evidence for their case.
The moment they even touched the ROMs of unreleased games they were engaging in piracy.
