The Providence Journal has more on the legal wrangling surrounding the bankruptcy of 38 Studios, as Rhode Island sued studio founder Curt Schilling and others over possible improprieties involved in loaning the developer millions to move to the state (thanks GameSpot). The report indicates Rhode Island is claiming 38 Studios knew they needed more money than they were borrowing to complete the project:

The people running videogame company 38 Studios apparently knew before moving here they didn't have enough money to finish their ambitious initial project and relied instead on speculative financial projections to run their studio, according to documents recently filed in R.I. Superior Court. Monday's court filings:

Whether the company's true financial picture or doubts raised by some people were communicated to then-Gov. Donald Carcieri or the R.I. Economic Development Corp. board is the central battleground of a lawsuit filed against company founder Curt Schilling and 13 other defendants.

Filings Monday by the state's lawyer show 38 Studios needed a full $75 million from Rhode Island, and then some, to have a chance to succeed. The company netted $50 million from an EDC bond sale. The lawyer, Max Wistow, alleges the shortfall was actively masked.