UPDATE: OnLive has filed for bankruptcy!

UPDATE: A statement from OnLive confirms the company and all of its assets have been acquired. The service will continue to operate under its new company and many of the original staff will be rehired.

OnLive’s statement:

We can now confirm that the assets of OnLive, Inc. have been acquired into a newly-formed company and is backed by substantial funding, and which will continue to operate the OnLive Game and Desktop services, as well as support all of OnLive’s apps and devices, as well as game, productivity and enterprise partnerships. The new company is hiring a large percentage of OnLive, Inc.’s staff across all departments and plans to continue to hire substantially more people, including OnLive employees. All previously announced products and services, including those in the works, will continue and there is no expected interruption of any OnLive services.

We apologize that we were unable to comment on this transaction until  it completed, and were limited to reporting on news related to OnLive’s businesses. Now that the transaction is complete, we are able to make this statement.

Original story: Rumors are currently circling the internet that the popular cloud gaming service OnLive has filed for bankruptcy and laid off its staff but WILL continue operating.

According to OnLive’s Brian Jaquet, who reached out to several media outlets today, the company will not be shutting down but he neither confirmed nor denied the rumours of bankruptcy.

Brian Fargo, from inXile, originally claimed to have recieved an e-mail from an OnLive employee which read:

“I wanted to send a note that by the end of the day today, OnLive as an entity will no longer exist.  Unfortunately, my job and everyone else’s was included.  A new company will be formed and the management of the company will be in contact with you about the current initiatives in place, including the titles that will remain on the service.

It has been an absolute pleasure working with you and I’m sure our path with cross again.”

Mashable later backed Fargo’s e-mail by saying ”According to a source close to the situation, the company called an all hands meeting at 10am PDT, at which the entire staff was fired. Some staffers may be rehired as the company transitions to its next unknown iteration.”

Since then Fargo has said a later e-mail from his source has been recalled.

We will bring you the latest updates as we get it.