It turns out that filing for bankruptcy can be a fraud scheme in of itself. Factor 5’s highly publicized shutdown is having some seriously legal ramifications, including a major lawsuit filed against it by its former employees.
The former staff claims that the founders of Factor 5 moved around assets prior to filing for bankruptcy, including money that would have gone towards their salaries. The company, which was famous for its work on Rogue Squadron and Lair, stopped paying employees on November 1st 2008 and subsequently fired everyone “with little or no notice” on December 19th.
James Smith, the lawyer representing the former employees, stated:
“We allege in the suit that Factor 5 and its three founders fraudulently transferred assets, including source code and other intellectual property to Blue Harvest, which is now known as White Harvest.
We believe and have alleged in the complaint that Factor 5 and White Harvest are essentially the same company, being run by the same people, being represented by the same sets of lawyers, with all the same management and ownership and control, performing all the same work that they were doing at Factor 5, just now with a new name and a new address.”
After officially shutting down last month, the company owed more than $900,000 in unpaid wages and $10 million of debt.