Rhode Island has filed suit against 38 Studios founder Curt Schilling over a deal that gave the company $75 million in state-guaranteed loans.
The former executive director of the Rhode Island Economic Development Corporation Keith Stokes and another board member close the the deal are also named in the suit.
38 Studios filed for bankruptcy in June a month after defaulting on the loan offered as incentive to lure the game company from neighboring Massachusetts.
The studio had spent about $30 million in the creation of its first game, Kingdoms of Amalur, but saw no revenue despite good sales due to the terms of a publishing deal with EA.
Governor Lincoln Chafee (republican) said the EDC board has taken the action to "rectify a grave injustice put upon the people of Rhode Island," reports the Boston Globe.
A federal investigation into the matter has found no wrongdoing on the part of 38 Studios, but a state police investigation is still underway.
Schilling himself blamed Governor Chafee for the collapse, suggesting that the governor's public comments on the studio had scuttled a publishing deal that would have brought in $35 million for the studio.
The decision to sue comes days before all seats in the democrat-controlled state house and senate are contested in local elections.
Fiscal responsibility is a major issue to U.S. voters, and the deal could have put taxpayers on the hook for as much as $112 million over eighteen years.
38 Studios collected $49.8 million of the loan, which was paid incrementally by the state as the company provided more jobs in the area.
The studio's assets have been claimed by Rhode Island, which has begun auctioning off what it can to recoup losses.
38 Studios was in the process of creating a $100 million free-to-play MMORPG known as Project Coopernicus set in the world of Kingdoms of Amalur.