After details of the winding-up petition against the operator of the water park on Burniston Road were revealed, borough councillor Tony Randerson said "there are more questions than answers".
Last year, cllr Randerson raised concerns over the unsecured Â£9 million loan given to Benchmark by the council for the development of the water park.
The latest news, he said, is "extremely bad" for residents who will have to "foot the bill", should the company fail to secure a new operator and go into administration.
Cllr Randerson said: "I found out yesterday. I think it's extremely bad news and unfortunately it's one of those occasions where I'm sorry to be right because I knew there would be risks involved and it seems they have now come to fruition.
"We'll have to see what comes out of this but If Benchmark goes into administration it raises questions about what will be the cost for the borough."
Cllr Randerson also added that "at this time of austerity standing the cost would be a disgrace".
"It's going be a difficult few weeks and I hope that Scarborough Borough Council will call some sort of emergency meeting. I'm going to the Town Hall today and I'll certainly be asking questions."
However, Cllr Helen Mallory, Scarborough Borough Council Deputy Leader, said the news "does not affect the council’s ongoing relationship with Benchmark or the security of the loan agreement we have with them".
It is not known how much of the loan has been repaid, however, cllr Randerson suggested the amount is "extremely small".