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38 Studios declares bankruptcy, under investigation by feds
38 Studios declares bankruptcy, under investigation by feds
June 7, 2012 | By Eric Caoili

Kingdoms of Amalur publisher 38 Studios has declared bankruptcy after failing to secure financing from the state of Rhode Island or outside investors to continue its operations.

This news follows several weeks of turmoil for the company brought about by reports that 38 Studios had run out of money, failed to make a payment for its $49 million loan granted by Rhode Island's government, and stopped paying its employees.

The company owes $150.7 million and lists its assets at $21.7 million, according to bankruptcy court filing details posted by The Associated Press. Its Big Huge Games subsidiary has also filed for bankruptcy, owing more than $121.4 million and claiming over $335,000 in assets.

"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," the company said in a statement.

"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."

Under pressure from taxpayers angered over the state's decision to fund the risky venture in the first place, Rhode Island Governor Lincoln Chafee said last month that 38 Studios would need to seek private investments if it wanted to stay open and finish its MMORPG "Copernicus."

But 38 Studios founder Curt Schilling claimed that Chafee's public comments scared away partners, including a publisher supposedly ready to sign a $35 million deal for a sequel to Kingdoms of Amalur. The company eventually laid off its entire staff, including its Big Huge Games team -- nearly 300 employees.

The Providence Journal reports that Rhode Island's State Police, the FBI, the U.S. Attorney's office, and Rhode Island attorney general Peter Kilmartin "are working together to investigate activities that have recently come to light at 38 Studios."

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Josh Jones
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Good luck to the families and I hope things work out for you.

Thomas Nocera
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The bankruptcy filing is sad, but not unexpected. The statement attributed to RI's State Police pertaining to the multi-agency investigation of "...activities that have recently come to light at 38 Studios" is very troubling and raises many questions. No one should leap to any conclusions about this investigation until its findings are made fully known.

Eric Geer
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I agree. I'm quite curious on what they have found.

Paul Marzagalli
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It's also a case of the foxes investigating the henhouse. I'm taking whatever comes out of this investigation with a grain of salt.

Aaron Casillas
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What both companies owe seems incredibly high and beyond the scope of 1 project. Not to clear on how the rest of the 70 million and supposed Pub deal of 35 million would have cleared them.

I hope they were not using one set of investors to pay another set of investors...

Wishes to BHG to come out winning.

Jonathan Murphy
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I heard a chunk of the team reformed to make new games. I hope they do well.

Nate Anonymous
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Considering that some of Schilling's comments about the viability of his firm are hard to square with the ultimate result, is it really that farfetched to imagine that there may be some decisions or communications to lenders, tax authorities, governmental authorities, etc that are similarly questionable? Whether they rise from foolish optimism to criminal liability will remain to be seen (and the emails will probably tell an interesting tale, regardless) no one should be surprised that criminal probes were launched considering the amount of public money lost.

I think the lesson to take from this sad story is if you take government money then you have to expect harsh scrutiny if things go sideways. It's not like a normal investment opportunity. Thus, make sure your behavior is unquestionable, cash flow solid, and ambitions solidly grounded in reality until you get off the government teat or otherwise a politician will end up wrecking your life.

John Tynes
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Okay, wait. Two hundred and seventy million dollars in debt? What in the fracking frack? That's insane.

Martin Sabom
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Yea over a quarter of a billion? WTF man?

Bret Dunham
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270 million in the hole?? Seriously, what costs that much money?

Aaron Casillas
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A baseball player, a comic book artist and a writer....

Kevin Patterson
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This is truly a sad situation. I really enjoyed Kingdoms and was looking forward to the MMO.
It's easy to criticize but remember this was someone's (and many others) dream that died, and I feel for them. I hope great things are born from the ashes and to all who lost their jobs, I wish you the best.

sean lindskog
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Well said.