Hydrophobia developer Dark Energy Digital is allegedly preparing to shut down. GamesIndustry.biz reports layoffs have begun, with affected employees concerned about outstanding pay from the company, which is said to be deep in debt.

Hydrophobia struggled to find an audience after diving into the digital distribution pool with less-than-adequate form, despite attempts by the developer to right the ship soon after launch. We've contacted Dark Energy Digital for comment.

This article was originally published on Joystiq.