Rhode Island based developer and publisher 38 Studios (the team behind Kingdoms of Amalur: Reckoning) looks to be in a dire financial situation. The company was founded in 2006 by baseball pitcher Curt Schilling. The Rhode Island government approved a loan of $75 million for 38 Studios as part of an Economic Development program – earlier this week, 38 Studios defaulted on the repayment to the tune of $1.25 million.

This default on payment has prompted the Rhode Island Economic Development Corporation to investigate what’s happening with the studio and publisher. Since then, 38 Studios issued a cheque to the Economic Development Corporation, which was then returned to 38 Studios once the EDC learnt that there were insufficient funds in the developer’s account; the cheque would have bounced.

In the worst case scenario, 38 Studios will be declared insolvent and be forced to close. This will leave Rhode Island taxpayers with the responsibility of paying back 38 Studios’ $75 million loan over the next eight years. It’ll also mean that all of 38 Studios’ intellectual property will belong to the Rhode Island public; the IP will likely be sold off to a different developer or publisher in order to recover some of the loan amount.

Adding to the woes of the languishing developer is the fact that they were unable to pay their staff. A source has also told website Joystiq that all temps and contractors at 38 Studios have been fired.

It’s not looking good for 38 Studios at all. What this means for their upcoming MMORPG based on the Amalur universe is pretty obvious. Unsurprisingly, they will not be appearing at E3 this year.

Source: Joystiq