The Rhode Island Economic Development Corporation (RIEDC, now called the Rhode Island Commerce Corporation)—Defrauding Investors in Municipal Bond Offering
The Rhode Island Economic Development Corporation (RIEDC, now called the Rhode Island Commerce Corporation) Allegedly Issued $75 million in Bonds to Finance 38 Studios Video Game Project
The Rhode Island Economic Development Corporation (RIEDC, now called the Rhode Island Commerce Corporation) issued $75 million in bonds in order to finance 38 Studios, an upstart video game project, according to SEC Documents.
The SEC also charged the bond underwriter in the case, Well Fargo Securities, with defrauding investors.
The 38 Studios project is part of a Rhode Island state government program intended to spur economic development and increase employment opportunities by loaning bond proceeds to private companies, the SEC reports.
The RIEDC Loaned $50 Million in Bond Proceeds to 38 Studios, but Wells Fargo Allegedly Failed to Communicate that 38 Studios Needed at Least $75 Million to Produce a Certain Video Game
The RIEDC allegedly loaned $50 million in bond proceeds to 38 Studios, and the remaining proceeds were used to pay related bond offering expenses and establish a reserve fund and a capitalized interest fund, according to the SEC’s complaint filed in federal district court in Providence
The SEC further reports that said loan and, in turn, bond investors would be repaid from revenues generated by video games that 38 Studios planned to develop. Wells Fargo, however, allegedly failed to disclose to investors that 38 Studios had conveyed it needed at least $75 million in funding to produce a particular video game, the SEC reports.
Hence, investors allegedly had not been properly informed when deciding to purchase the bonds that 38 Studios faced a funding shortfall even with the loan proceeds and could not develop the video game without additional sources of financing, the SEC notes.
The Peiffer Wolf Securities Lawyers Often Assist Investors
The Peiffer Wolf securities lawyers assist investors who lose money as a result of unsuitable bond offerings. They take most cases of this type on a contingency fee basis and advance the case costs, and only get paid for their fees and costs out of money they recover for their clients.
Investors who believe they lost money as a result of unsuitable bond offering schemes are encouraged to contact the securities lawyers at Peiffer Wolf, Jason Kane or Joe Peiffer, for a free, no-obligation evaluation of their recovery options, at 585-310-5140.