Curt Schilling's video game company cuts entire staff

Former Red Sox pitcher Curt Schilling's 38 Studios gaming company is crumbling around him.

As news spread over the past week that the company was hurting for cash, spending $49 million of a $75 million state loan, the Boston Globe reports that the young video game publishing house laid off all of its nearly 400 employees as of today.

"I'm stunned, and I'm heartbroken," Leominster fantasy author and consultant to 38 Studios R.A. Salvatore, told the Boston Globe. "This is one of the best teams I've ever seen assembled. They were doing amazing work."

The downward spiral began in 2010 when Schilling took the $75 million loan guarantee from the state of Rhode Island to set up shop in Providence. State officials hoped that 38 Studios would bring in new jobs and turn Providence into a high-tech hub.

When the company was two weeks late on a $1.1 million payment and requested more money from the state earlier this month, Rhode Island officials held an emergency meeting, according to the Boston Globe.

"It's an unfolding tragedy here in Rhode Island," Rhode Island Gov. Lincoln Chafee told the Boston Globe.

Ultimately 38 Studios did not get more money from the state and hasn't been able to find other outside investors. The gaming company didn't tell state officials about the massive layoff, according to the Boston Globe, and if 38 Studios defaults on the loan, most likely the debt will be on the backs of taxpayers.

Currently 38 Studios is working on a multiplayer game called Copernicus but the scheduled release isn't until next year. Getting into this type of multiplayer fantasy gaming business is known to be incredibly risky because companies have to compete with the ever-popular "World of Warcraft."

CNET contacted 38 Studios for comment. We'll update the story when we get more information.