Rumours, enigmatic sources and mysterious emails are circulating today, claiming to show that cloud gaming service OnLive has laid off its entire staff and will soon cease to exist as a company. Developer Brian Fargo set off the news frenzy when he posted an alleged employee email he’d received this morning (PDT), which contained the statement: “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.”

OnLive’s Director of Corporate Communications Brian Jacquet has been playing a straight bat to inquiries about this information, offering the standard corporate “we don’t respond to rumours” response, followed by a more straightforward “Let me be clear. We are not going out of business.”

Other unconfirmed sources have suggested that OnLive is preparing to file for bankruptcy.

That’s the extent of the known information and speculation so far. Jacquet’s denials do not directly contradict the possibility of mass layoffs.

OnLive recently announced a partnership with the Android-based Ouya console, a project that proved to be a populist darling on Kickstarter.

Update: The latest word from a former employee who spoke to engadget is that upwards of 50% of OnLive’s staff were informed that they were being made redundant this morning. That same source suggests an unnamed third party is looking to buy the company, who are currently attempting to reduce astronomical operating costs of around $5 million USD per month.

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