A number of staff laid off by Factor 5 have launched a lawsuit against the bankrupt company, alleging that the studio’s founders fraudulently transferred assets before declaring bankruptcy in order to avoid paying employees.

The California, US-based Lair developer filed for Chapter 7 bankruptcy and shut its doors last month. According to the Marin Independent Journal, the company’s filings estimated it had up to $100,000 in assets and up to $10 million in debts. Filings also included 69 claims for unpaid wages totalling more than $900,000.

"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," James Smith, a lawyer representing the employees, told the MIJ.

"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," Smith added.

The plaintiffs allege that the works transferred to White Harvest include progress made on an unannounced Wii entry in the Star Wars: Rogue Squadron series.

The lawsuit claims that Factor 5 stopped paying workers on November 1, 2008, before laying them off “with little or no notice" on December 19.