For Crytek, it's a PR disaster they can't get out of imho. They get flak from SC fans for suing their game, their engine looks [censored] to non-SC gamers that just see the awful clunky alpha videos, and IP lawsuits generally don't go down well with the gaming public, and that aggravated by the reports of them not paying their staff for a while when things started to go downhill. At this point, cold hard cash from the suit is all they can hope for, together with producing a good game (ie not a tech demo, nor a super pretty but terribly shallow FPS) to show their engine is decent. Or, that seems unlikely but who knows, they reconciliate with CIG and help them refocus and deliver a separate S42.
The "awful clunky alpha videos" are being made using Lumberyard. Cryengine 3 (up to version 5 now) is great at making FPS's that also look pretty. The backers put their hands in their pockets after watching demos made by Crytek using Cryengine 3 and lots of overpromising from Roberts.
If this goes to court and we get to see where CIG's money went, I know who is going to have more than a PR disaster. It won't be Crytek.