Curt Schilling's 38 Studios Files For Bankruptcy, Faces Federal Investigation

We presume this is how 38 Studios' lawyers opened their conversation with Curt Schilling: "What do you want first? The bad news, or the worse news?"

The bad: Schilling's video game company, after a public, monthlong death spiral, declared bankruptcy today. That's it, that's the end. All operations have ceased, all assets will be liquidated. No Project Copernicus.

For us, the filing means a peak at some of the inner workings of the last days of 38 Studios, in the form of court documents. They're not pretty. The company says it owes $150.7 million to 1,079 creditors, the largest being $115.9 million to the Rhode Island development fund for a sweetheart loan that lured the studio to set up shop in Rhode Island in the first place. On top of that, three subsidiaries reported liabilities totaling another $30 million. All told, 38 Studios has about $22 million in assets, so guess what, creditors (and taxpayers)? You're not getting paid back.

Now for the worse news: state and federal authorities are launching a probe of 38 Studios' finances.

"The state police, the attorney general's office, the U.S. Attorney's office and the FBI are opening an investigation into 38 Studios, both the money that came from the state as well as the money that came from Bank Rhode Island," Rhode Island State Police Col. Steven O'Donnell told WPRI.com on Thursday afternoon.

The investigation has something to do with the company's attempts to obtain loans secured with tax credits that were never issued. I won't even begin to speculate what they might be looking for, but maybe Deadspin LLC can weigh in in the comments. Whatever it is, Schilling—who it turns out owns 82.9 percent of the company—had better hope this is as bad as the news gets.

Schilling's 38 Studios under investigation; files for bankruptcy [WPRI]