The boss of Hellgate: London house Flagship Studios has confirmed reports of mass layoffs at the company, but has denied speculation that the developer is no longer operational.

"It is with deep regret that I must announce that Flagship Studios has laid off most employees,” CEO Bill Roper said in a post on the Hellgate: London forums.

“However, the core management and founding team members are still at Flagship.”

Back in June, Flagship CVO David Brevik insisted that the developer was not sinking after a staff member reported that employees were leaving the company “in droves”. Brevik said that both Flagship's San Francisco and Seattle studios were fully staffed with around 100 employees, with the former working on Hellgate: London content and the latter working on the free-to-play MMORPG Mythos.

"The past five years have been an incredible experience for us, but unfortunately, we couldn’t sustain the size of the company any longer," added Roper.

Voodoo Extreme also reports that Flagship is embroiled in a legal dispute over intellectual property rights with Asian firm HanbitSoft, but the company maintains that it "owns the rights to all its technology and IP".

The consumer site further suggests that Flagship will now focus on the development of casual games.

The developer will no longer be taking any new subscribers for Hellgate: London and all current subscriptions will not be billed.

Edge-Online has contacted Flagship for further details about its current situation and future plans.