SEC and Wells Fargo settle a suit over 38 Studios

    
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The seemingly never-ending saga of 38 Studios and Project Copernicus has another coda this week in its sad history. Gamasutra is reporting that the Securities and Exchange Commission and Wells Fargo Securities have settled a lawsuit over the now-defunct studio.

The two entities got into it back in 2012 when the SEC claimed that Wells Fargo failed to reveal the full details of the bond loan from Rhode Island. Furthermore, the SEC said that this omission hid indicators that 38 Studios was “destined to fail” according to financial projections.

Need a refresher on the whole sordid history of the studio and its never-to-be MMORPG? Check out our latest Game Archaeologist column on the subject – it was current as of just last week.

Source: Gamasutra

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Alyn
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Alyn

Ah yes, politics, the bile of our existence.

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rafael12104

Ah, that pillar of propriety and transparency, Wells Fargo. Heh.

The EA of the banking world.

If only we could pull the plug on that den of thieves. But unfortunately, they are too big to fail now.

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Mr.McSleaz

No bank is “Too Big to Fail”, They just paid our Politicians to program that into us.

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Bryan Correll

I’m more pro-business than the average poster, but I think the “too big to fail” argument is a load of crap. No matter how big a company is there is someone (or multiple someones) out there ready to pick up the slack. There might be some short term pain (most notably for employees of the failed company) But if a poorly run company is going to fail then good riddance.

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Armsbend

None of them are too big to break up into the smaller, regional banks they used to be.

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rafael12104

Well, this is what is meant, at least from what I’ve learned. It’s not really that a bank the size of Well’s Fargo can’t fail. They can. The question is can we afford to allow it.

It all goes back to the repeal of the Glass-Steagall Act which separated consumer from commercial banking so that banks could not risk consumer deposits on commercial ventures.

Well, you guys know the outcome, the housing crisis. Several huge financial institutions went under, and we reached a point where if it continued the economic loss would be so great we wouldn’t be able to recover as a country.

We are talking about the bankruptcy of giants like GE, P&G. Millions of people not only unemployed but with no money in the bank. Overnight, a return to 1930.

So, we are still at that point with the biggest banks. Consumer banks have shrunk and not expanded. Consolidation continues. The result is that there are some banks that are just too big to fail because we can’t allow it.

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Fervor Bliss

“Too Big to Fail”
IMHO It is not that you have to save every bank, but you need to support some healthy banks. (Why we went thru the stress test and “bank bailout”). What is needed is to get the money to businesses using loans. Now it looks like a bank bailout but the banks are not the real target of the bailout The banks are the tool used to pump money into the economy.
Read Tim Geithner and actions taken in foreign financial crisis. He did almost exactly the same thing.

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rafael12104

Yup. Agreed. I read the same thing. And yet, we have a few banks out there that we can not afford to fail because of their size and the web of investments that impacts various industries. Wells Fargo is one, unfortunately.

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Fervor Bliss

Yes it was interesting stuff. Long time since I have thought about it. Hopefully, sociology depts take the lessons of hands-on human behavior used.

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Fervor Bliss

I do not know how much “fiduciary duty” a bank has to disclose to a co-signer that the bank has no faith in 38 studios. That is why they needed a co-signer in the first place.
Still, Wells Fargo is a bunch of crooks, that god we have regulations.

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Armsbend

Don’t worry – the powers that be are doing everything in their power to get rid of those protections.

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Mr.McSleaz

You mean those Regulations that Bill Clinton got rid of back in the 90’s, thus setting the stage for the 2008 financial meltdown, Those Regulations?

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Armsbend

Yes. But the new protections of the post 2008 Obama era up are being fought at every turn. 10 years the assholes are counting on it’s people to have forgotten.

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Fervor Bliss

Well I mean the The Glass-Steagall Act of 1933. Which were put in after the depression, but why would we learn our lesson from that. These regulations has been whittled down by both parties since the 1960’s. But yes the Gramm-Leach-Bliley Financial Services Modernization Act of 1999 was terrible, but not the only bad deregulation.
Bernanke and Geithner did a great job. Deserve a lot of credit. IMHO

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Armsbend

Should the state of Rhode Island not also be allowed to sue Wells Fargo? A $25M (a full third) gap in production costs certainly didn’t help the taxpayers of the state any.

Well Fargo is the worst – whatever the fine was – it wasn’t enough.

Xijit
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Xijit

For once we both completely agree on something

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Bryan Correll

RI did sue Wells Fargo and Barclay’s Capital. That suit was settled for roughly $26 million in 2016.

In the case of this suit by the SEC the Rhode Island Commerce Corporation (a quasi-governmental organization that negotiated the original deal on behalf of the state) was actually a co-defendant. They settled their part for $50 thousand back in 2017.

The main charge in this case is that the defendants were aware, from 38 studios’ own internal projections, that the bond backed by the state would be insufficient to cover the costs of relocation and bringing their next big project to market but did not disclose this information to investors.

Additional ‘fun’ fact: This settlement has not been finalized as the SEC, being part of the federal government, is closed due to the ongoing government shutdown.

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Armsbend

gotcha thanks for reminding me :)

50K lol