38 Studios declares bankruptcy, federal investigation underway

38 Studios has officially declared bankruptcy, amid reports that state and federal agencies are investigating the company.

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In a move that seemed inevitable, 38 Studios has finally declared bankruptcy. To make matters worse, various state and federal agencies have reportedly launched an investigation into the company in light of recent events surrounding its money woes.

In a statement to The Providence Journal, a spokesperson said, "This action comes after several weeks when the company has reviewed, considered and received the recommendations and advice with respect to potential avenues for relief that are currently available. After ongoing negotiations with the State of Rhode Island and potential investors and other interested parties, the Company has been unable to find a solution to the current stalemate."

WPRI reports this means the company and its subsidiaries will be liquidated. The company had already laid off its entire staff.

Meanwhile, Rhode Island State Police superintendent Colonel Steven O'Donnell says that his police, the FBI, the U.S. Attorney's office, and the Rhode Island attorney general are all working together to investigate the company. O'Donnell said the investigation is into "activities that have recently come to light at 38 Studios." Namely, the investigation centers around the large Rhode Island loan to the company, along with an $8.5 million loan from Bank RI that was reportedly borrowed against state film tax credits which hadn't been issued.

The situation has been tense between 38 Studios founder Curt Schilling and the Rhode Island government, with Schilling accusing state Governor Lincoln Chafee of scaring investors. EA had passed on publishing a sequel to Kingdoms of Amalur: Reckoning, and the company was attempting to find a new publisher. Chafee disputed the account.

The fallout has ended happily for some people, though. Some displaced employees of Big Huge Games were hired on to form a new Epic studio in Baltimore.

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  • reply
    June 7, 2012 2:30 PM

    Steve Watts posted a new article, 38 Studios declares bankruptcy, federal investigation underway.

    38 Studios has officially declared bankruptcy, amid reports that state and federal agencies are investigating the company.

    • reply
      June 7, 2012 3:34 PM

      Is this a good game? Been thinking of getting it for my PS3

      • reply
        June 7, 2012 10:16 PM

        The demo blew hard, so I didn't buy it.

      • reply
        June 7, 2012 10:26 PM

        PC if you can hack it.

      • reply
        June 8, 2012 5:11 AM

        I've heard pretty good reviews of it, although it may not be without its faults. I would say if you're looking for a good summer game , if you can find it on Amazon/Best Buy on sale, it would be worth a purchase.

      • reply
        June 8, 2012 10:53 AM

        PC version was fun, all it needs really is an FoV tweak. I was entertained playing it, the artwork really is outstanding and the play is smooth. I would have purchased the DLC had they patched the camera first.

        The demo was rough because it happens indoors, once you get out into the world it really is beautiful.

    • reply
      June 7, 2012 3:38 PM

      There's also the question of the corporate officers being charged with state and federal criminal violations. The Boston Globe asked that question last week: http://articles.boston.com/2012-05-31/business/31927922_1_wages-case-studios-employees/2

      38 Studios and its officers and agents, including Schilling, its chairman, could also be liable for misdemeanor criminal charges that carry jail terms if convicted... The Fair Labor Standards Act requires that employees be paid at least minimum wage, with both the company and its officers liable for double the amount owed, plus attorney’s fees.

      By not notifying of mass layoffs 60 days ahead of time, they're already in violation of the WARN act. I don't think we'll be hearing from Curt Schilling in a public capacity in the near future, at least with regards to anything but baseball.

    • reply
      June 7, 2012 5:50 PM

      duh? this is kind of what companies with no assets do.

      • reply
        June 7, 2012 6:25 PM

        Here's the breakdown of the debts and assets, according to the filing details, which are being reported by numerous non-gaming journalism sources:

        38 Studios Rhode Island debts: $150.7 million
        38 Studios Rhode Island assets: $21.7 million
        Big Huge debts: $121.4 million
        Big Huge assets: $335,000

        The big question, obviously, is this: how did the officers of 38 Studios mismanage the funds to the point where they couldn't uphold their duties to inform their employees 60 days ahead of time of any mass layoffs? I keep listening to the Bombcast news section discussions on the situation, and how there was the potential of "hey, this private funding talk is happening right now; we might get funding!", but that never coming through, and the officers kept that under wraps to prevent the employees from panicking. However, this state is exactly the thing that the WARN act is supposed to prevent.