Flagship did not offer further details concerning the staff cuts, but stated that there was some truth to the reports.

The news follows statements issued by the company last month in which Flagship CVO David Brevik dismissed rumors of widespread staff departures after the poor reception of the PC action RPG, adding that the company "believe[s] in the future of Hellgate."

More possible evidence of turbulence within the struggling studio comes from Korean news website TheGames.co.kr translated by fansite Hellgate Guru, which states that Korean publisher HanbitSoft is taking full control of the Hellgate property, which it co-owns.

According to the report, HanbitSoft said it that it intends to take full control of the property, adding that its own in-house development team will be able to "properly manage and develop Hellgate: London into a good game with proper content."

Moreover, HanbitSoft's legal team reportedly told Voodoo Extreme that Flagship had offered up its Mythos (PC) intellectual property as collateral for a loan from the publisher to maintain operations. As revealed last March, Flagship pledged Hellgate: London for a loan from lender Comerica Bank.

"Flagship Studios does not currently own the intellectual properties to either game, which are held in separate companies subject to the security interests of lenders," said HanbitSoft's lawyers. "HanbitSoft hopes to work with Comerica and some of the team at Flagship to see if there is a way to continue to generate content to keep Hellgate online in Asia and to finish the development of Mythos."

It is yet unclear how HanbitSoft's loan to Flagship, backed by the Mythos property as collateral, grants the publisher the rights to wrest control of the Hellgate: London property from the developer.

Flagship Studios responded to the reports, dismissing the story as "an outright lie."

"We have no idea where they are getting their information from and have asked legal counsel to pursue the issue," Flagship said. "We are mystified by HanbitSoft's conclusions and any attempt to take over the IP will be met with a strong and swift response... We are outraged that Hanbitsoft would attempt to completely tarnish the reputation of its most vital developer."