Former Red Sox pitcher Curt Schilling’s video game company, 38 Studios, has laid off all of its employees in the wake of financial difficulties, according to a key company consultant.

The company, which had close to 400 employees in Providence and Timonium, Md., attracted top talent from the video game industry.

“I’m stunned, and I’m heartbroken,’’ said R.A. Salvatore, a Leominster fantasy author who was a consultant to 38 Studios and whose son worked at the company. “This is one of the best teams I’ve ever seen assembled. They were doing amazing work.’’

The unraveling of 38 Studios has been startlingly fast.


38 Studios received a $75 million loan guarantee from Rhode Island in 2010 to move from Maynard to Providence. But Rhode Island officials held emergency meetings after the company was two weeks late on a $1.1 million payment this month and asked the state for millions more in aid to stay afloat. The firm is asking Rhode Island for more money, applying for $8.4 million in film-tax credits, which it could then sell to other companies.

The company didn’t have enough cash to meet its payroll on May 15 and recently lost its chief executive and another top official. With its marquee product more than a year away from release, 38 Studios has been unable to find an outside investor to rescue the company.

“It’s an unfolding tragedy here in Rhode Island,’’ said Rhode Island Governor Lincoln Chafee in an interview in Providence.

Chafee said that Schilling’s plea for more aid from the Rhode Island Economic Development Corp., which administers the loan guarantees to 38 Studios, fell short. “There was a feeling that we needed to be sold,’’ he said, but Schilling failed to supply a workable business plan with a legitimate chance of success.

The political fallout continued in Rhode Island, as a member of the EDC board resigned Thursday and, Chafee said, two other members whose terms had expired asked not to be reappointed.


Schilling’s company did not inform the governor’s office about the mass layoff. Chafee said the state hasn’t been able to confirm how many workers were let go. State officials have also struggled to get other critical details since 38 Studios ran into financial trouble.

“Communication has been very difficult,’’ Chafee said. “It’s come to the point where we have to verify what we hear.’’

Chafee said he believes 38 Studios executives have tried hard to find additional investors, such as venture capitalists. Schilling has publicly said he already put in $30 million into the company, and he told state officials he didn’t have any more money left to invest, despite his lucrative baseball career.

“He says he’s all in,’’ Chafee said. “Tapped out.’’

The original loan guarantee package was approved during the administration of Chafee’s predecessor, then-Governor Donald Carcieri, a Republican. Chafee, an independent, criticized the deal with 38 Studios in 2010, when he was a gubernatorial candidate.

Rhode Island has already provided the company about $49 million of the $75 million loan to 38 Studios. Chafee said he believed that if the company went under, taxpayers would likely be on the hook for an even greater amount, including interest and other costs. He also said that he thought the value of the intellectual property and other assets would be minimal, reducing the amount of money the state could later recoup. “Intellectual property is not worth a lot,’’ he said.

Schilling’s company, founded six years ago, has poured tens of millions of dollars into developing an elaborate role playing game code-named Copernicus. But such “massively multiplayer online’’ games are notoriously costly and difficult to develop. Many wind up being scrapped, delayed, or never catch on with users.


Company spokesman Adam Kahn declined to comment Thursday, and Schilling has said little to reporters. But he has repeatedly taken to Facebook and Twitter to try to rally employees and raise hopes for the company’s future.

On Thursday, Schilling linked to images of the company’s forthcoming game with the caption: “You guys deserve this.’’

He also tried to rebut Chafee’s claims that the company’s first game, called “Kingdoms of Amalur: Reckoning,’’ was a flop. Chafee has repeatedly said that if the game performed better that 38 Studios would have been able to attract outside investors and wouldn’t be on the verge of shutting down.

But Schilling insisted Thursday that game, which went on sale in February, “outperformed’’ the expectations of its publisher, Electronic Arts. He said it sold more than 1.2 million units in the first 90 days on the market. His post did not explain, however, how much money 38 Studios earned from the game or why it hasn’t been enough to sustain the company.