The Russian entity of mobile developer Game Insight has been officially declared bankrupt. In addition to that, a criminal case has been opened against its leadership, with the company owing millions to its former employees.
What is known about Game Insight Russia’s bankruptcy?
- As reported by Russian newspaper Izvestia, the Moscow Arbitration Court issued a ruling on October 20.
- The company is now subject to insolvency proceedings to satisfy, to the extent possible, the claims of its creditors.
- The total debt of Game Insight’s Russian office is more than 142 million rubles ($2.3 million): unfulfilled obligations to creditors amount to 76.2 million rubles, while wages and severance pay arrears amount to 66.5 million rubles.
- Denis Kachura, the insolvency practitioner involved in bankruptcy proceedings, told Izvestia that the company owes more than 120 million rubles ($1.97 million) to 300 employees.
- “The situation is quite hypocritical — the management and beneficiaries simply left behind some of the people who worked with them for many years and contributed to their business’ long-term success,” one source said.
- It is worth noting that Game Insight’s business in Russia was profitable. The company’s revenue for 2021 was 1.5 billion rubles ($24.5 million), and its profit surpassed 100 million rubles ($1.64 million).
- The ongoing investigation should determine whether the bankruptcy was deliberate. According to Kachura, the reason for Game Insight’s insolvency is simple: the only source of income for the Russian office was its Lithuanian parent company Game Insight uab, which stopped paying its local employees earlier this year.
- The insolvency practitioner believes that it will be possible to cover no more than 10% of creditors’ claims, as Game Insight began to massively get rid of its property shortly before the bankruptcy.
- Game Insight had several large offices across Russia covering thousands of square meters. But right now, all of its remaining property is located in a warehouse with an area of one hundred square meters.
The risk of criminal prosecution
- Last month, a criminal case was opened against Game Insight for non-payment of salaries and other obligations.
- It is unclear who will be the defendant in this case, given that the company’s Russian entity has changed four different executives over the past year.
- The criminal charges, however, may be dropped if Game Insight proves that it couldn’t pay salaries to Russian employees from abroad (i.e. from its main office in Lithuania), one lawyer told Izvestia.
- The latter is technically true, since it became quite difficult to transfer money between countries due to Western sanctions against Russia. So there is a chance that hundreds of former Game Insight employees won’t see any compensation.
In June, Game Insight started a liquidation of its Russian entity, with up to 600 people losing their jobs as a result. The company refused to pay salaries by saying that it had no money in its accounts, although its games were still generating revenue. At least 74 lawsuits were filed against Game Insight due to unpaid wages.
A third party who was appointed as the liquidator of Game Insight’s Russian business failed to force all employees to sign voluntary resignation letters. So bankruptcy proceedings began as a result.
Game Insight continues to operate its business from its Lithuanian headquarters. The company also reportedly opened a new entity in Russia to replace the closed one and support its live games.