38 Studios declares bankruptcy, law enforcement investigating [Updated]

38 Studios, in a move surprising absolutely no one, has declared bankruptcy. This report comes hot on the heels of the news that the Project Copernicus developer has laid off all of its employees and sold Big Huge Games. In addition to covering the bankruptcy, the Providence Journal revealed that "state and federal authorities have launched an investigation into [the company]."

State police Col. Steven G. O'Donnell states that the inquiry is taking place "to investigate activities that have recently come to light at 38 Studios." According to the Journal, these activities include taking out loans totaling $8.5 million US "based on state film tax credits that had not yet been issued." Things are looking pretty grim for Curt Schilling and his studio, but we'll just have to stay tuned to see how the rest of this plays out.

[Update: Our sister site Joystiq reports that the Rhode Island governor has stated, "We are going to do everything possible to maximize return on our investment [...] Taxpayers in Rhode Island can have full confidence that if there's a penny that we can get, or a nickle or a dime, we'll get it." The company is suspected to be worth "tens of millions of dollars."]