We spoke with Area 35 CEO Hiroyuki Yura in September at PAX West about the studio's upcoming Advance Wars spiritual successor Tiny Metal, a turn-based, isometric strategy game with a 20-hour single-player campaign and 1v1 multiplayer. It was supposed to be out today, but the studio announced yesterday (via Gematsu) that it's been delayed until just before Christmas. That's not good, but according to this Kotaku report, it gets a lot worse.

The problem goes back to 2013 and Area 35's Kickstarter for a different game called Project Phoenix, "a JRPG with a squad based RTS game design, brought to you by veteran developers and creators from the East and West," also headed up by Yura. The campaign raised over $1 million, more than ten times its original goal, but the game still hasn't seen the light of day. It was supposed to be out in 2015, but very late in that year it was pushed back to late in 2018—a huge delay by any measure.

Tiny Metal, under the direction of Area 35, went to Kickstarter in 2016 but that campaign failed to catch fire, and was ultimately cancelled—but the developers said in an update that even without the Kickstarter, "we already have secured the budget required to deliver the basic vision of the game."

That funding, according to claims made by Tariq Lacy, a developer who worked as a marketing and PR manager on the game, actually came from the Project Phoenix Kickstarter. In a message on Twitter and Facebook that has since been deleted but can still be seen on Kotaku, Lacy said he learned shortly after being hired that Tiny Metal was funded "by running a scam through Kickstarter."

"After they received the Kickstarter money for Project Phoenix, they subsequently shut down their original company (Creative Intelligence Arts, or 'CIA'), then used that same money to establish Area 35 and pay for staff, equipment, and an office to make Tiny Metal," Lacy wrote.

"The company’s CEO, Hiroaki Yura, asked me to deflect any accusations that this money was from anyone other than private investors; in actuality, Hiroaki only dipped into his own funds and asked for money from private investors after the funding that he had secured for Tiny Metal was running low. I refused this request to fabricate and minimize the truth for the purpose of misleading others, then told Hiroaki to remove me from all matters regarding Project Phoenix so that I would not be implicated in this affair."

In response that allegation, Yura leveled one of his own, saying that Lacy's contract had been bought out "due to him being a toxic employee who has sexually harassed our female staff amongst many other problems," and that his post about Kickstarter malfeasance was taken down because it was "factually incorrect." Lacy denied Yura's accusations, describing them as "libel."

Lacy suggested to me in a follow-up conversation through Twitter that CIA Inc. may not actually be closed, but that it and Tiny Metal developer Area 35 are the same company in all but name, with shared office space and PCs. Beyond that, however, he said he was legally restricted by NDAs from providing details. Yura acknowledged in an email that the two companies share an address, but said they have "different staff and purpose."

"CIA’s core business is audio production and Area 35 is game and animation development," he said. "We used to have CIA do all of the above but we needed corporate identity and clarity hence we separated the companies. We have absolutely no money from CIA that went into Area 35, it was created by our own money from the executives." The majority of Area 35, he added, is held by himself and a partner.

As for the status of Project Phoenix, which remains in limbo, CIA and Area 35 business development manager Gian Carlo Peirce said in an email that "the project isn't bankrupt," it just doesn't have any money left for development.

"Creative Intelligence Arts has held onto enough funds to create the backer rewards and their fulfillment, but the development funding has been exhausted. We’re not the first and we won’t be the last Kickstarter to have these kinds of challenges, but we’re committed to seeing it through with a quality game," he wrote.

In a similar "not the first" vein, Peirce said the budget was blown, despite the Kickstarter raising ten times its Kickstarter goal, because "the scope changed" from what was initially the developer initially envisioned. "We believe Project Phoenix can be a AAA-level title and that’s what we’re working toward," he wrote.

"Project Phoenix is still a very important project for CIA, and we fully intend to see the project completed-albeit at a much later date than was originally planned. Some backers are understandably upset about that. That said, absolutely no funding from Project Phoenix has ever been shifted or used for any purpose with TINY METAL. If you aren’t familiar with how the independent video game industry works, it can be confusing to hear of multiple companies and projects, but these are separate enterprises with their own funding."

Nonetheless, the future of Project Phoenix appears to rest on Tiny Metal's shoulders. "We've said within Project Phoenix Kickstarter updates that we have a private investor for Tiny Metal who is open to providing funding for Project Phoenix if we do well with Tiny Metal," Peirce said. "Tiny Metal's success may mean we finally will have the resources we need to bring Project Phoenix to our backers and fans."

For now, the matter is entirely a case of one word against another, with neither side providing evidence for their allegations. But it's ugly, and could get a whole lot uglier before it's over—and even if the worst of the allegations ultimately blow over, the fumbling of Project Phoenix shines a very harsh light on the inherent riskiness of crowdfunding.

Tiny Metal is now scheduled for release on December 21.