Wells Fargo Securities will pay an $800,000 civil penalty to settle a lawsuit with the Securities and Exchange Commission over Rhode Island’s failed deal with former Boston Red Sox pitcher Curt Schilling and his now-defunct video game company, 38 Studios, The Boston Globe reports.
The proposed settlement was announced on Monday and is awaiting approval from a federal judge.
Although Wells Fargo doesn’t admit or deny any wrongdoing, it will be permanently barred from violating certain municipal securities and other laws under the proposed agreement.
Schilling founded 38 Studios in Massachusetts in 2006, but relocated it to Rhode Island in 2010 after striking a deal with the state’s economic development agency for a $75 million loan. The company released one game during that time, the action role-playing game “Kingdoms of Amalur: Reckoning.” It was fairly well-received by critics and reportedly sold about 1.2 million copies in 90 days — a respectable number for a new intellectual property from a fledgling studio. But, Lincoln Chafee, who was governor of Rhode Island at the time, called the game a failure and said it needed to sell at least three million copies to break even.
38 Studios officially filed for bankruptcy in May 2012, laying off its entire staff and cancelling its second project, a massively multiplayer online game codenamed “Copernicus.” Rhode Island then filed a lawsuit against Schilling and other 38 Studios backers. It’s received about $61 million in settlements from those cases, according to The Boston Globe.
The SEC later charged Wells Fargo and the Rhode Island Commerce Corporation with securities fraud, claiming the two companies knew the $75 million loan wasn’t enough for 38 Studios to complete its work on “Copernicus,” but they failed to notify investors of the risk. It also said Wells Fargo failed to disclose that it was representing both 38 Studios and the Rhode Island Commerce Corporation as a bond placement agent.
The Rhode Island Commerce Corporation has already settled its lawsuit with the SEC, according to The Boston Globe. It paid a $50,000 penalty but didn’t admit to any wrongdoing. The SEC and Wells Fargo reportedly reached a settlement agreement in January, but put it on hold because of the recent U.S. government shutdown.
Video game publisher THQ Nordic recently acquired the rights to the “Kingdoms of Amalur” IP and is reportedly considering sequels and new content.