Portalarium, the developers of Shroud of the Avatar, owes investors answers to their questions. SeedInvest says they eluded its efforts and are refusing to provide information on when refunds will be made available.
For years, Shroud of the Avatar has been a dark stain on the MMORPG genre, Kickstarted MMOs, and genre founding father Richard Garriott, and for those who haven’t fully tuned out of the storyline, the tale has only become weirder and more infuriating. Allow us to bring you up to date on today’s news, which is that SeedInvest has also given up on the firm.
Shroud of the Avatar was Kickstarted in 2013 by Garriott, Starr Long, and studio Portalarium as a spiritual successor to Garriott’s classic MMORPG, Ultima Online, which EA still owns all of the rights to. SOTA’s development was unconventional to say the least, with weird crowdfunding antics like when globe-trotting multimillionaire Garriott sold his hair and blood to help finance the game. In 2017, Portalarium supplemented its nearly $2 million Kickstarter haul with telethons soliciting donations from gamers and an almost $800,000 equity crowdfunding investment round through SeedInvest; at the time of that seed round, Portalarium claimed a valuation of $25 million with $11 million in crowdfunds.
Concerns grew following the game’s second launch in 2018, which was followed by layoffs, a transition to free-to-play, and Garriott’s pledges that the game will operate indefinitely. Gamers chastised the company for its heavy reliance on crowdfunding, as well as its enormous $6999 bundles aimed to whales. The playerbase on and off Steam shrank from modest to insignificant (Steam is around 100 peak players nowadays). Years have passed since Kickstarter incentives were distributed. Richard Garriott resigned as CEO and said that the position had been abolished. Then there was the strange confusion about who was running the firm, when the new CEO denied knowing he’d been promoted to CEO and claimed he hadn’t signed the legal paperwork that required his signature. Portalarium’s physical office closed in March 2019, a year before COVID. Portalarium unexpectedly collapsed towards the end of 2019 and moved the game to a new firm, Catnip Games, managed by Chris Spears, Portalarium’s previous chief developer.
In the aftermath, Portalarium and Catnip representatives stonewalled and insulted the press in public and private, making it even more difficult to get accurate information on the company’s unfulfilled promises. Indeed, just two months ago, we openly urged Richard Garriott, who continues to promote the game on occasion, to take responsibility for what had occurred. For the past several years, the general consensus among the remnant SOTA community has been that Garriott just handed the game on to a newly formed business for close to nothing in order to avoid any financial entanglements as the game’s fortunes continued to deteriorate.
However, the company’s legal duties to its stockholders were not negated by its corporate deception. While Kickstarter is simply a contribution platform with minimal redress for contributors if a gaming developer fails to follow through on its promises, this is not the case with SeedInvest. SeedInvest is an equity crowdfunding platform; although it uses the term “crowdfunding,” equity crowdfunding is a legitimate investment that provides small-scale investors access to a market that is ordinarily restricted to them. As a result, Portalarium owed its SeedInvest backers duties, including filing yearly reports with the Securities and Exchange Commission (SEC) to give transparency to investors. It failed to do so in 2019 and 2020, implying that it concealed legally essential information for the majority of 2018 and 2019 until the business was liquidated. In reality, elements of Portalarium’s material on the SeedInvest website seem to have been erased.
Throughout it all, SeedInvest has remained largely silent, doing little to assist investors as far as we can tell. However, this week, SeedInvest surprised almost everyone by breaking its public silence and sending a letter to SeedInvest investors who contributed to Portalarium’s equity crowdfunding round.
“To the best of our knowledge, Portalarium has stopped operations and has failed to issue a formal dissolution declaration despite efforts by our team to get one on your behalf,” SeedInvest emailed supporters, implying that investors could still have a chance at legal redress.
“While we offer shareholder reporting services on behalf of our portfolio businesses, any such changes are ultimately the responsibility of the firms.” Unfortunately, despite numerous requests, Portlarium failed to deliver future investor updates after obtaining funds on SeedInvest. As investors, we understand how aggravating it is when firms fail to offer frequent business updates. According to the rules of an asset purchase, Portalarium investors may be entitled to an earn out depending on future performance, and as a result, the legal organization you invested in has not yet been fully dissolved. We have not been informed of the conditions of this earn out. However, considering the amount of time that has gone and the absence of any major updates, any prospective dissemination looks to be doubtful.”
The letter doesn’t reveal anything that investors didn’t previously know, but it’s reassuring to see SeedInvest finally confess that it’s had no success holding Portalarium and its leadership responsible. At this point, pursuing it will need some dedicated investors and their lawyers — and it may not even be worth the time and money. Which is probably exactly what Portalarium was hoping for all along.
Emails and Reddit were used as sources. Thank you to all of our tippers, as well as all of the other players who, like us, refused to give up.
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