Things aren't looking good for System Shock 3, according to a former developer at Otherside Entertainment. In a recent post, a former dev claims that "the team is no longer employed there."
On RPGcodex.net (via VGC), a user who claims to be a former member of the System Shock 3 dev team wrote about the "failure of the project." After posting their concerns about the game in late 2019, the anonymous developer dropped back into the forums in late January 2020 add that "everyone on the content side is no longer with the studio."
"I never suggested we were halfway done," the developer added. "Core systems are a great foundation for a game but most of the work is content development which we were critically behind in, both in real assets and in tool support for an efficient pipeline."
"Was the failure of the project right?" they went on. "It's hard to say. If Starbreeze hadn't gone into crisis I think we would've delivered something interesting with some fresh and innovative gameplay, but a much smaller game than what people were expecting and inevitably disappointing for a sequel to such a beloved franchise."
The developer mentions Starbreeze as the publisher that "went into crisis" around February 2019. Starbreeze would sell the rights to System Shock 3 back to Otherside Entertainment, and development lead Warren Spector would tell VideoGamesChronicle.com in May later that year that the game "has a lot of interest from publishers." It looks like a deal with a publisher never planned out.
Back in December 2019, former Otherside community manager Sam Luangkhot confirmed that there had been a number of departures from the studio. System Shock 3's writer and director, senior designer, level designer, QA manager, and senior producer were all let go between August and November 2019.
Last we saw of System Shock 3, it was being shown off at GDC 2019 by Warren Spector. The development lead remains employed at Otherside Entertainment at the time of writing.
It's worth noting that these developments have no bearing on the System Shock remake. The remake is currently slated for release this year from Nightdive Studios, and a full 20 minute gameplay demo was shown back in March 2019.