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Rhode Island loan to Curt Schilling’s 38 Studios is now under investigation by the SEC

The Securities Exchange Commission is actively investigating the state of Rhode Island’s $75 million loan to Curt Schilling’s 38 Studios, according to the Providence Journal. The deal led to the release of The Kingdoms of Amalur: Reckoning, as well as $89 million in debt and allegations of fraud.

The deal between 38 Studios and the state of Rhode Island’s Economic Development Commission was based on 38 Studios’ promise to hire and maintain 450 jobs in the state. 38 Studios did manage to produce one game, but it wasn’t able to keep its staff at the agreed upon number. A later investigation also found that the funds had been badly mismanaged. Schilling himself had used $4 million of the loan to repay his own investments. More than that though, the investigation showed that Schilling accepted the loan even as he knew development would cost at least $20 million more, a move which could be construed as fraud.

The EDC has stated that it isn’t authorized to reveal the exact nature of the investigation, and the SEC typically does not comment on ongoing investigations as a matter of procedure. The EDC did confirm, however, that it has paid over $100,000 in legal fees to advise its staff on how to reply to the SEC inquires.

In May of 2012, 38 Studios filed for bankruptcy. Including the principal loan and interest, that left Rhode Island with an unpaid bill of roughly $112.6 million. The state is currently conducting an investigation of its own into the defunct developer’s executives.

Rhode Island considered simply ignoring the debt at one point, but eventually the state’s House Finance Committee decided that “this isn’t about 38 Studios. It’s about protecting [Rhode Island’s] reputation.”