Red Sox Legend Curt Schilling Accused of Running a Ponzi Scheme
Red Sox Legend and three time World Series champion, Curt Schilling is basically flat broke after investing his baseball fortune in his own video game outfit 38 Studios. 38 Studios filed for Chapter 7 bankruptcy on June 7th. The company’s inability to raise funds cost them about 400 jobs and $75 million dollars from taxpayers due to loan guarantees from the government of Rhode Island.
The Company had used projected future sales to pay off current debt obligations, a formula which has investors calling for Schilling’s head and saying he ran a Ponzi scheme. The company had an asset base of $21.7 million dollars and liabilities of $150 million to the State of Rhode Island and more than 1,000 investors.
Schilling told his family recently that he had put more than $50 million dollars, money he had earned playing baseball, into the company and that it was all gone. The Games Industry International reported Schilling as saying,
“The money I saved and earned playing baseball is probably all gone. Life is going to be different,”
Schilling almost had a light at the end of the tunnel. An investor nearly wrote a check for about $15 million, to be raised to $20 million if Rhode Island offered 38 Studios $6 million in tax credits and renegotiated its loan guarantee so that the investor would be among the first to be repaid. The State of Rhode Island refused to agree to those types of terms.
Schilling claims that a public announcement by Rhode Island Governor Lincoln Chafee that the Company was close to insolvency scared away investors and caused the $35 million dollar deal 38 Studios had with Electronic Arts for release of “Kingdoms of Amalur: Reckoning” to fall apart.
Sales from the action-packed sequel couldn’t be tapped for dividend payouts because 38 Studios had to repay Electronic Arts, which had issued the company an advance in March 2010.