TimeGate Studios reportedly lays off entire staff in wake of bankruptcy filing

TimeGate studios, the developer behind Section 8 and Gearbox's co-developer on Aliens: Colonial Marines, reportedly laid off its entire staff today, reports Kotaku.

According to Kotaku's sources, staff were sent home early today.

Earlier this month TimeGate filed for Chapter 11 bankruptcy protection in Texas Southern Bankruptcy Court. Publisher SouthPeak Interactive, who was awarded arbitration in an ongoing lawsuit with TimeGate and could collect $7.35 million in compensatory damages, said the bankruptcy filing is a "ruse" to protect TimeGate executives from fraud judgment.

"The sole purpose of the TimeGate bankruptcy is to free these non-debtor insiders of the fraud findings and any alter-ego claims," lawyers representing SouthPeak told The Wall Street Journal. "On barely one day's notice, the debtor now seeks to ram through an insider asset-confiscation plan that lets the insiders keep everything and gives nothing to unsecured creditors like SouthPeak."

Layoffs hit the Texas-based studio back in March, affecting about 25 people. TimeGate president Adel Chaveleh told Polygon the layoffs were connected to the falling through of a publishing deal.

"TimeGate is preparing, as is the entire industry, for the transition to next-generation consoles and new business models," Chaveleh said. "As part of this reinvention, all projects and strategic initiatives continue to move forward at the studio."

Polygon has reached out to TimeGate and will update this story with more information as we have it.