38 Studios declares bankruptcy, formal investigation begins regarding finances

Curt Schilling's embattled 38 Studios declared Chapter 7 bankruptcy (liquidation), as Rhode Island and federal authorities open an investigation into how the company handled its finances.

WPRI reports the state police, attorney general's office, US Attorney's office and the FBI will investigate 38 Studios, "both the money that came from the state as well as the money that came from Bank Rhode Island." The Providence Journal confirmed the bankruptcy this afternoon.

Beyond the controversial taxpayer backed loan of $75 million to 38 Studios, the Bank Rhode Island reportedly loaned the developer $8.5 million earlier this year against tax credits that haven't materialized.

This article was originally published on Joystiq.