The Securities and Exchange Commission and Wells Fargo Securities have agreed in principle to settle an ongoing lawsuit over Rhode Island’s failed $75 million deal with 38 Studios, the video game studio owned by former Boston Red Sox pitcher Curt Schilling.
But final approval is currently on hold as a result of the government shutdown, according to a court filing made available from the AP.
Lawyers for the SEC and Wells Fargo Securities asked a federal judge to put the case on hold until the shutdown’s end in order “to give the SEC and its relevant divisions and offices time to consider and approve the settlement-in-principle,” according to the statement.
“In connection with the shutdown, all but a limited number of SEC staff members have been furloughed, and the SEC and its staff are unable to conduct most normal activities.”
A proposed settlement has not been disclosed.
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In 2010, Curt Schilling took 38 Studios from Massachusettes to Rhode Island after the Rhode Island Commerce Corp. guaranteed the studio would receive a $75 million loan for making the move. According to the SEC, Wells Fargo and the Commerce Corp. failed to disclose that 38 Studios would receive only $50 million from the bond offering, leaving a $25 million hole to fill.
The studio would go on to release “Kingdoms of Amalur: Reckoning” in 2012. But soon after the studio would run out of money and file for bankruptcy, kicking off lawsuits and investigations.
In 2016, the SEC sued Wells Fargo and Rhode Island’s economic development agency, claiming that they made misleading statements regarding bonds that were offered to investors and used to fund the deal with 38 Studios. A settlement of $50,000 was previously made by the economic development agency previously, with no admission of wrongdoing.
The SEC also alleges Wells Fargo received substantial fees for representing 38 Studios, while simultaneously representing the Commerce Corp. as a bond placement agent while failing to disclose this.
The SEC lawsuit is currently pending against a Wells Fargo employee.
