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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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