The Securities and Exchange Commission is now involving the Rhode Island Commerce Corporation and Wells Fargo Securities, levying fraud charges against both groups in relation to the bankruptcy of former game developer 38 Studios. In its complaint, the SEC is alleging that both groups knew that the $75 million loan that brought 38 Studios to the state would be insufficient to cover their costs and withheld that information. In addition, it is alleged that Wells Fargo had a conflict of interest with 38 Studios that it should have disclosed during the loan period.
“We allege that the RIEDC and Wells Fargo knew that 38 Studios needed an additional $25 million to fund the project yet failed to pass that material information along to bond investors, who were denied a complete financial picture.”
-SEC Enforcement Division Director Andrew Ceresney
The SEC joins the Rhode Island Economic Development Corporation alleging fraudulent dealings in the $75 million loan given to 38 Studios for the now-defunct game Project Copernicus. 38 Studios went bankrupt in 2012 after releasing their game Kingdoms of Amalur, leaving state taxpayers on the hook for $115 million in unpaid principal, interest, and fees associated with the loan.
(Source: Providence Journal)
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