38 Studios LLC, a video game company owned by Curt Shilling, the former Boston Red Sox pitcher who is beloved by baseball fans in Massachusetts, is filing for Chapter 7 bankruptcy, according to a recent report from Boston.com.
And the bankruptcy filing has revealed a tangled web of bizarre decisions by the company that have led local authorities to launch a criminal investigation into the failure of Schilling’s project.
Schilling launched the company six years ago with the hope that it would create a popular multiplayer online role-playing game. But Schilling’s decision to file for Chapter 7 represents what one bankruptcy attorney called a choice to “essentially throw in the towel.”
Sources say that Schilling’s company listed a remarkable 1,000 unpaid creditors in its bankruptcy filing. The sheer size of this figure helped convince local law enforcement officials to start their criminal investigation related to the company’s demise.
Among the creditors are the company’s employees, who are reportedly owed more than $150 million, although the company claims to have only $22 million in assets, so many creditors, including the employees, will likely be disappointed.
But the identity of the company’s biggest creditor, the state of Rhode Island, has created a significant amount of controversy for Schilling, who is well known for his conservative, anti-government political leanings.
Sources say that 38 Studios LLC owes the Rhode Island Economic Development Corp., and by extension, taxpayers in Rhode Island, more than $115 million in interest and unpaid principal.
A few years ago, Rhode Island had extended a $75 million loan to Schilling after he promised to bring 450 new jobs to the state. Alas, this promise ultimately failed, as 38 Studios LLC fired all of its 400 employees two weeks ago.
The Rhode Island Economic Development Corp. will likely be the first creditor satisfied by the sale of the company’s assets, but it will still likely lose a significant amount of its original investment.
In the meantime, Schilling still has to worry about the investigation into his company’s failed efforts to buy and sell millions of dollars in tax credits, as well as its failure to pay its employees.