[New post] “A Melting Ice Cube:” The Bankruptcy of Paddle8

Joseph Gergel posted: "By Joseph Gergel On March 15, 2020, Paddle8, an online art auction marketplace, filed for Chapter 11 bankruptcy.[1] For a promising start-up company that was once hailed as a revolutionary disruptor of the art market, the bankruptcy came as a shock to " Center for Art Law "A Melting Ice Cube:" The Bankruptcy of Paddle8 Joseph Gergel Jun 30 By Joseph Gergel On March 15, 2020, Paddle8, an online art auction marketplace, filed for Chapter 11 bankruptcy.[1] For a promising start-up company that was once hailed as a revolutionary disruptor of the art market, the bankruptcy came as a shock to many art world insiders.[2] Over the course of the proceedings, it became apparent that Paddle8 engaged in misappropriating client funds for operating expenses, and it was unable to pay their seller-consignors who were owed money for the proceeds of the sales of artworks at auction.[3] Most of these unpaid clients were non-profit organizations, such as NAME and NAME, that held charity auctions with Paddle8 and relied on the proceeds for their fundraising efforts.[4] After the CEO and the entire board of directors resigned on DATE, there was no one left to run the company.[5] An independent trustee was appointed by the court and the company was liquidated, selling off its remaining intellectual property assets during the proceeding.[6] Complaints were filed against the former CEO, board members, and investors over breach of fiduciary duties, and legal issues arose concerning secured versus unsecured creditors.[7] By examining the company as it was taken apart piece by piece in liquidation, the bankruptcy of Paddle8 offers cautionary lessons for entrepreneurs in order to avoid the path that one lawyer referred to as "a melting ice cube."[8] The Concept In May 2011, Paddle8 was founded as an innovative online marketplace for contemporary art auctions, specializing in the "middle market" range of artworks between $10,000-$100,000.[9] Referred to in the press as the "eBay" of the art market, Paddle8 was a pioneer in the online sale of contemporary art, posed to disrupt the art industry..[10] The company aimed to streamline the auction experience by combining the excitement and expertise of an auction house with intuitive 21st-century technology."[11] Similarly, it sought to democratize the art market by opening access to new audiences previously ignored by traditional auction houses.[12] Furthermore, the model eliminated physical brick and mortar expenses, allowing the company to expand its reach to over 500,000 users in diverse geographic markets.[13] As part of its strategy, Paddle8 prioritized charity auctions, which generated brand goodwill and credibility.[14] Paddle8 was co-founded by three partners, each of whom brought their own unique expertise to the company: Alexander Gilkes was a former chief auctioneer at Phillips auction house and an LVMH executive; Aditya Julia - an entrepreneur and Harvard Business School Baker Scholar, and Osman Khan - a banker with prior experience at Goldman Sachs and Harvard ties.[15] The combination of art, entrepreneurship, and banking expertise was considered a perfect match, and the founders positioned themselves and the company as representing a new generation of Internet start-ups that received major press attention.[16] Paddle8 secured significant capital from investors through three rounds of funding.[17] The first started in February 2012, when Paddle8 raised $4,000,000 from venture capital firms Founder Collective and Mousse Partners.[18] Then, in June 2013, Paddle8 raised $6,000,000 from private investors during the Series B round. Finally, the company's most significant round of funding occurred in October 2015, when it raised $34,000,000.[19] Noteworthy, some of the individual investors during these rounds included prominent figures in the art, media, and technology industries, such as Damien Hirst, Rolf Sachs, Jay Jopling, David Zwirner, Edgar Berger, Matthew Mellon, Prince Alexander von Fürstenberg, Eric Fellner, and Stavros Niarchos.[20] In its early years, Paddle8 experienced success, expanding to major art market cities like New York, Los Angeles, and London.[21] In 2014, the company reported selling more than $35.8 million of art on its platform, a 146% increase from the previous year.[22] In addition, Paddle8 also gained recognition for its philanthropic collaborations, raising more than $33 million for non-profit organizations by January 2015.[23] The company made headlines with its unique auction sales, including an unreleased Wu Tang Clan album sold to "pharma bro" Martin Shkreli for $2,000,000.[24] Over the remaining years, Paddle8 continued to report remarkable growth, with a 21% increase compared to the previous year in 2018.[25] Paddle8 was competing in a growing market against such established giants as eBay and other auction houses (Sotheby's, Phillips, Christie's), as well as against other online marketplaces for luxury goods. Its unique marketing positioned itself on the cutting edge of contemporary art, tailored to emerging collectors at an affordable price range that could bypass the gatekeeping tactics of traditional auction houses while maintaining the exclusivity of a niche platform. The Downfall Despite impressive reported sales and investments, Paddle8 never generated a profit and relied on debt financing to cover operating expenses.[26] The company prioritized expansion over developing its identity, acquiring Blacklots, an internet software and services company, in 2012, and obtaining an option of a stake in Artnet, a competing art auction platform. [27] In May 2016, Paddle8 merged with Auctionata, a German online auction house that specialized in luxury goods.[28] However, the company's expansion efforts suffered a major setback when Auctionata declared insolvency in February 2017 amid accusations of violating trade regulations.[29] This led to dozens of layoffs, reportedly "gutting" the staff, and Paddle8 being in need of an investor to save the company.[30] Lightyear Collective, a multi-family office incorporated by hedge fund manager Christopher Hsu, provided a $5 MIllion loan, allowing it to become an independent company again.[31] Over the course of the next two years, Paddle8 went through several changes of ownership. First, the company merged with The Native S.A., a Swiss-listed international technology and media company focused on e-commerce.[32] This merger, which was influenced by Paddle8 advisors Cameron and Tyler Winklevoss (of Facebook notoriety), emphasized Paddle8's new focus on blockchain technology and cryptocurrencies.[33] Its first auction as a merged company accepted Bitcoin for the first time, and The Native founder Izabela Depczyk took on the role of CEO.[34] However, in 2019, Facebank AG acquired a majority interest in Paddle8, and a few months later, Pulse Evolution group acquired Facebank AG.[35] In addition, a new CEO, former head of f Culture, Fashion Partnership and Events at Tumblr, Valentine Uhovski, was appointed in November 2019, just a few months before the filing of bankruptcy.[36] Uhovski abruptly resigned in February 2020 after arguments with the board.[37] Bankruptcy was announced on March 15, 2020. The Bankruptcy By the time of the bankruptcy, it became clear that Paddle8 had been using client funds to cover operating expenses, instead of segregating the funds owed from art sales.[38] The extent and duration of this practice remain unclear. Peter Rich, the former head of the Board of Directors, stated that Paddle8 timely paid its clients in the previous years and was "current" in substantially all payables at the time of the resignation of the prior CEO, Valentine Uhovski, in November 2019.[39] The issue escalated when New American Cinema Group, a non-profit film organization founded by famed experimental filmmaker Jonas Mekas, filed a lawsuit alleging misappropriation of funds.[40] This lawsuit sparked a wave of similar complaints from other non-profits, including high-profile charities of celebrities like Jay Z and Justin Bieber, the California College of The Arts, the Rema Hort Mann Foundation, The Hepatitis C Trust, UN Women UK, and Penumbra Foundation.[41] Following its bankruptcy filing, Paddle8 attempted to reassure consignors that it was not shutting down.[42] In a letter dated March 27, 2020, addressed to the California Institute of The Arts, a Paddle8 employee stated that "[w]e are not shuttering the business" and that the bankruptcy filing was made to "protect our partners and preserve the business."[43] Paddle8's landlord filed a motion stating Paddle8 intended to remain in business and continue its lease of its offices in New York..[44] However, while Paddle8 positioned itself as reorganizing by registering for a Chapter 11 bankruptcy, the filing revealed that the company had over 100 debtors and estimated assets of $0-$50,000, with $10,000,000-$50,000,000 in estimated liabilities.[45] Following the bankruptcy filing, Paddle8's transition from an operating company to liquidation was swift. The resignation of the CEO was followed by the resignation of the entire Board of Directors, leaving only Peter Rich to oversee the company.[46] Rich, a Certified Public Accountant, served as the sole remaining board member until he also resigned on April 29, 2020, after the bankruptcy had commenced.[47] At a court status conference, the judge was left to ask: "[s]o who's running the company?"[48] Rich's departure left Paddle8 without any leadership, prompting the court to appoint Megan Noh, an independent trustee. [49] Noh, an attorney specializing in art law at Pryor Cashman LLP, determined that the company had made no sales since filing for bankruptcy.[50] Noh recommended to dissolve the company and sell its remaining assets, describing the situation to the court as "dire."[51] Melting the Ice The dismantling of Paddle8's corporate assets posed several challenges. Paddle8 did not own any real estate, which would have been the first assets sold, and their basic office furniture and supplies were considered worthless and therefore not sold.[52] On the other hand, the contemporary art installations in their abandoned New York office posed a problem under the Visual Artists Rights Act (VARA).[53] Prior to vacating the leased property, said art had to be removed. Under VARA, artists must be given notice of the destruction of art installations and an opportunity to remove them.[54] Following this regulation, Noh notified the landlord, who was also listed as an unpaid creditor, of their obligations pursuant to VARA.[55] The only valuable assets left were Paddle8's intellectual property, which were auctioned off to the public through Nevium LLC. The auctioned assets included its trademark, domain name, social media accounts, website, iOS applications, and various client databases, collectively selling for just under $500,000.[56] Secured versus Unsecured Creditors In its initial bankruptcy filing on March 16, 2020, Paddle8 listed its top twenty creditors who have the largest unsecured claims, including the entity who loaned money to the company, lease holders for property, consignors, and contractors. In total, the debt was estimated at $10-50 million.[57] In its Summary of Assets and Liabilities submitted to the court on April 8, 2020, the total debt was listed at $18,948,645.51.[58] However, by the time of this filing, the loan entity, Stock Access Holdings, was described as a secured creditor by Paddle8.[59] Such a distinction between secured and unsecured creditors are of vital importance in bankruptcy. In bankruptcy, secured creditors have a higher priority and are paid before unsecured creditors, who are left to divide any remaining funds. While Paddle8 insisted that Stock Access Holdings was the only secured creditor, many of the seller-consignors argued that proceeds from sale of their property were in fact "secured" under the New York Arts and Cultural Affairs Law ("NY ACAL").[60] NY ACAL states that consigned artworks from artists and/or their heirs are to be held as trust property and should not be subordinated to any other claims.[61] Section 12.01(1) establishes a consignor/consignee relationship when the art merchant accepts the consigned artwork, and the consignee is thereafter deemed to be the agent of the consignor.[62] The auctioneer never obtains title to the proceeds, which is exempt from the company's estate in bankruptcy.[63] New York case law also supports the auctioneer's fiduciary duty as an agent of the consignor that extends to all consignors.[64] In a lawsuit against Christie's brought by the consigner Cristallina S.A., a Panamanian corporation, in 1986, the New York Supreme Court found that the auction house "had a fiduciary duty to act in the utmost good faith and in the interest of [consignor]," specifying that "[w]hen a breach of that duty occurs, the agent is liable for damages caused to the principal."[65] Several seller-consignors raised the NY ACAL law, including the Rema Hort Mann Foundation, Penumbra Foundation, The New American Cinema Group, Inc., The Shawn Carter Foundation, the UN Women National Committee UK, and Counseling In Schools, Inc.[66] The court ordered the segregation of the funds of parties who filed complaints citing NY ACAL.[67] The status of the Stock Access Holdings loan also became a subject of dispute, as the Trustee argued that the loan was not legally secured.[68] FBNK Finance S.à.r.l, a corporation based in Luxembourg controlled by Mr. Sergey Skaterschikov, failed to submit a UCC Filing Statement with the appropriate recording officer in Delaware to declare the loan as secured.[69] Although the Convertible Loan Agreement of December 12, 2017 referred to the loan as a "SECURED LOAN AGREEMENT" in bold and capital letters, and a subsequent March 2019 letter also referred to the loan as secured, it was still alleged to be improperly filed by the Trustee.[70] It is important to note that at the time of the loan, FBNK became the indirect controlling shareholder of Paddle8.[71] Allegations of Breach of Fiduciary Duties On May 1, 2020, The Committee for Unsecured Creditors and the Trustee initiated adversary proceedings against the former CEO, as well as several board members and investors, alleging breaches of fiduciary duties of due care, loyalty, and candor.[72] The allegations centered around an insurance policy for $1 million that covered directors' and officers' liability.[73] The Committee, made up of Marcel Katz Art, The Little Black Gallery, and the VentureDevs, Inc. claimed that these insiders had been grossly negligent in their use and preservation of property and assets.[74] Attorney Paul Cossu, who represented several non-profit organizations, filed a declaration stating that "it is hard to imagine a more egregious breach of an auction house's fiduciary duty than misdirecting the sale proceeds of a consignor to the auction house itself."[75] In a complaint against former CEO Valentine Uhovsky, the Committee alleged that he had knowingly and culpably violated his fiduciary obligations to Paddle8 and its stakeholders by acting in bad faith and showing reckless disregard for his duties.[76] According to the complaint, Uhovsky had been instructed by the Board to scale back business operations, cut expenses, and conduct reductions in force in January 2020.[77] He was also instructed to present budgets at a planned meeting in Florida.[78] However, Uhovsky never attended the meeting and subsequently resigned.[79] Peter Rich blamed the financial issues on Uhovsky's "mistakes or mismanagement" and his reliance on auction receipts to cover operating expenses.[80] Rich went on to explain that after Uhovsky's resignation, he "distributed self-serving emails to employees, vendors, and non-profit organizations that assigned blame to others for the actions that only he controlled as CEO."[81] In his defense, Uhovsky pointed the finger at the Board and the investors, stating that he left the company "after months of deceit and misinformation."[82] On August 28, 2020, the Committee filed an amended complaint, adding new defendants Isabela Depczyk, Norman Hanson, Christopher Hsu, Peter Rich, and Sergey Skaterschikov, all of whom had served as officers, directors, or investors in the company.[83] Additionally, the Trustee initiated an adversary proceeding on February 18, 2021 against FBNK and its CEO, John Textor.[84] The Settlement None of the allegations were ultimately pursued because the parties went to mediation and settled.[85] As part of the settlement, FBNK, the majority investor, paid $1.25 Million to Paddle8, and the insurance policy paid $150,000.[86] However, the Trustee found that the bank loan was an unsecured claim and the loan was subordinated to the rights and distribution of all other general unsecured claims.[87] This meant that the seller-consignor claims and all other general claims would be settled before addressing the loan. This was a complete reversal of the initial filing of creditors. Parties were to be paid based on a pro rata distribution of the remaining assets after other administrative fees, including attorney's fees, were paid.[88] At the end of the liquidation process, the group of unsecured claims was only paid $184,763, which was only 7% of the total allowed claims amounting to $2,538,503.[89] The Aftermath With the bankruptcy finalized, is Paddle8 set to re-emerge? The original website for Paddle8 is live, advertising Paddle8 as an "NFT charity marketplace."[90] However, the website does not yet appear to be operational in facilitating NFT sales. Paddle8's trademark and domain name were ultimately acquired by Facebank, the former majority shareholder, who may be the force behind Paddle8's potential reinvention.[91] The entire story of Paddle8's collapse has not been widely reported, perhaps due to the fact that it folded amidst thousands of other companies during the pandemic. Also, the complications of going through bankruptcy and emerging on the other side is not a common story. If Paddle8 is to re-emerge successfully, what can it learn from its past failures? Paddle8 was hailed as a revolutionary model for the art world and received the funding, press, and brand recognition that would point to a successful investment. Ultimately, not only did the seller-consignors lose most of their commissions, but a large group of seasoned investors lost $44,000,000 in equity due to its collapse. Paddle8's attempt at rapid expansion, through the acquisition of other auction platforms, put undue pressure on the company's finances, leading to a cycle of loans on top of loans. This highlights the importance of prioritizing a sustainable business model and finding a pathway to profitability. It remains to be seen whether Paddle8 will rise again and what lessons investors will derive from this endeavor. ABOUT THE AUTHOR Joseph Gergel is a J.D. Candidate at Fordham University of School of Law. He received a Masters Degree in Modern Art: Critical and Curatorial Studies from Columbia University and a B.A. in Individualized Study from NYU's Gallatin School. He currently serves as director of kó, a contemporary art gallery based in Lagos, Nigeria. He was a Spring 2023 Intern at the Center for Art Law. Suggested Readings  Eileen Kinsella, Paddle8 is Filing for Bankruptcy – and it Owes Tens of Thousands of Dollars to Justin Bieber, Jay Z's Foundation, and Others, ARTNET (March 17, 2020), https://news.artnet.com/art-world/paddle8-bankruptcy-1806951. Nicholas O'Donnell, Paddle8 Bankruptcy a Harbinger in the Time of COVID19 and The Coming Art World Crisis, JDSUPRA (March 25, 2020), https://www.jdsupra.com/legalnews/paddle-8-bankruptcy-a-harbinger-in-the-18837/. Margaret Carrigan and Claire Voon, Former Paddle8 Chief Executive Sued for $1M, THE ART NEWSPAPER (May 11, 2020), https://www.theartnewspaper.com/2020/05/11/former-paddle8-chief-executive-sued-for-dollar1m Paddle8 Bankruptcy Trustee Launchs $6 Million Suit Against Former Member of Board of Directors, ARTFORUM (Sept. 25, 2020), https://www.artforum.com/news/paddle8-bankruptcy-trustee-launches-6-million-suit-against-former-member-of-board-of-directors-84004. Maximiliano Duron, Paddle8 Trustee Sues John Textor for $6M, ARTNEWS (Sept. 25, 2020), https://www.artnews.com/art-news/news/paddle8-bankruptcy-trustee-lawsuit-john-textor-1234571761/ Art Industry News: Paddle8 Bankruptcy Proceedings Take a Heated Turn With Allegations of 'Reckless' Leadership and 'Disloyalty', ARTNET (Sept. 28, 2020), https://news.artnet.com/art-world/art-industry-news-september-28-2020-1911204. Select Resources: Voluntary Petition for Non-Individuals Filing Bankruptcy, In re P8H, Inc., Case No. 20−10809−smb (Bankr. S.D.N.Y. Mar. 16, 2020) (Doc. No. 1). ↑ See generally Zachary Weiss, See Meet Paddle8's Alexander Gilkes, Art auction Disruptor, OBSERVER (Mar. 3, 3026), https://observer.com/2016/03/meet-paddle8s-alex-gilkes-art-auction-disruptor/. ↑ See Eileen Kinsella, Paddle8 Is Filing for Bankruptcy — and it Owes Tens of Thousands of Dollars to Justin Bieber, Jay Z's Foundation, and Others, ARTNET (Mar. 17, 2020), https://news.artnet.com/art-world/paddle8-bankruptcy-1806951. ↑ See Id. ↑ Case Conference at 6, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. June 22, 2020) (Doc. No. 102). ↑ Paddle8 - Intellectual Property and Intangible Asset Sale, NEVIUM (July 6, 2020), https://nevium.com/paddle8/. ↑ See Chapter 11 Plan of Liquidation at 70, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. Aug. 26, 2021) (Doc. No. 237). ↑ Case Conference at 14, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. June 22, 2020) (Doc. No. 102). ↑ Declaration of Peter Rich at 1, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. Mar. 20, 2020) (Doc. No. 8). ↑ See Rip Empson, With Big-Name Backing and Some eBay Flavor, These Startups Are Looking to Shake Up The Art Market, TECHCRUNCH (June 14, 2013), https://techcrunch.com/2013/06/14/with-big-name-backing-and-some-ebay-flavor-these-startups-are-looking-shake-up-the-art-market/. ↑ The Merging of Two Giants: Paddle8 and The Native, USA ART NEWS (Jan. 25, 2018), https://usaartnews.com/art-market/the-merging-of-two-giants-paddle8-and-the-native. ↑ See Katy Donoghue, Izabela Depczyk on How Paddle8 is Changing the Game. Again., WHITEWALL (Nov. 1, 2018), https://whitewall.art/art/izabela-depczyk-paddle8-changing-game. ↑ See Paddle8 Raises $34 Million in Series C Funding, GLOBENEWSWIRE (Oct. 28, 2015), https://www.globenewswire.com/news-release/2015/10/28/1201947/0/en/Paddle8-Raises-34-Million-in-Series-C-Funding.html. ↑ Kimberly Chou, Art Site Takes Charitable Turn, THE WALL STREET JOURNAL (Dec. 13, 2012), https://www.wsj.com/articles/SB10001424127887324481204578177391210355294. ↑ See generally Anthony Noto, Sotheby's and Christie's may soon feel the sting of star-studded startup competition, N.Y. BUS J. (Oct. 30, 2015, https://www.bizjournals.com/newyork/news/2015/10/28/sothebys-and-christies-may-soon-feel-the-sting-of.html. ↑ See generally Jacob Bernstein, He Knows His Royalty, And His Art, THE NEW YORK TIMES (Oct. 29, 2014), https://www.nytimes.com/2014/10/30/fashion/meet-alexander-gilkes-co-founder-of-paddle8-an-online-auction-house.html. ↑ Declaration of Peter Rich at 1, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. Mar. 20, 2020) (Doc. No. 8). ↑ Online Art Market Paddle8 Secures Series A Funding of c.$4MM Led by Prominent Technology Investors Founder Collective with Luxury Investors Mousse Partners, PR NEWSWIRE (Feb. 9, 2012), https://www.prnewswire.com/news-releases/online-art-market-paddle8-secures-series-a-funding-of-c4mm-led-by-prominent-technology-investors-founder-collective-with-luxury-investors-mousse-partners-139010189.html. ↑ See Paddle8 Raises $34 Million in Series C Funding, GLOBENEWSWIRE (Oct. 28, 2015), https://www.globenewswire.com/news-release/2015/10/28/1201947/0/en/Paddle8-Raises-34-Million-in-Series-C-Funding.html. ↑ Id. ↑ Paddle8 headquarters and office locations, CRAFT, https://craft.co/paddle8/locations. ↑ See Paddle8 Raises $34 Million in Series C Funding, GLOBENEWSWIRE (Oct. 28, 2015), https://www.globenewswire.com/news-release/2015/10/28/1201947/0/en/Paddle8-Raises-34-Million-in-Series-C-Funding.html. ↑ Kimberly Chou, Art Site Takes Charitable Turn, THE WALL STREET JOURNAL (Dec. 13, 2012), https://www.wsj.com/articles/SB10001424127887324481204578177391210355294. ↑ Devin Leonard and Annmarie Hordern, Pharma's Bad Boy Exec Martin Shkreli Paid $2 Million for Wu-Tang Clan's New Record, BLOOMBERG (Dec. 9, 2015), https://www.bloomberg.com/features/2015-martin-shkreli-wu-tang-clan-album/. ↑ Declaration of Peter Rich at 1, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. Mar. 20, 2020) (Doc. No. 8). ↑ Proposed Disclosure Statement to Accompany Chapter 11 Plan of Liquidation at 15, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. Aug. 26, 2021) (Doc. No. 238). ↑ Paddle8 Acquires Blacklots, MERGR, https://mergr.com/paddle8-acquires-blacklots.; Paddle8 Seeks Stake in ARTNET, ARTOBSERVED (May 20, 2013), http://artobserved.com/2013/05/paddle8-seeks-stake-in-artnet/. ↑ Karsten Strauss, A Tale of Two Auction Houses: Auctionata and Paddle8 Join Forces, FORBES (May 12, 2016), https://www.forbes.com/sites/karstenstrauss/2016/05/12/a-tale-of-two-auction-houses-auctionata-and-paddle8-join-forces/?sh=1908a19711b0. ↑ Alyssa Buffenstein, Auctionata Files for Insolvency, ARTNET (Jan. 19, 2017), https://news.artnet.com/art-world/auctionata-insolvency-proceedings-822965. ↑ Nate Freeman, Paddle8 Staff "Gutted" Following Split with Auctionata; Co-Founder Has Departed Company, ARTNEWS (Feb. 14, 2017), https://www.artnews.com/art-news/news/paddle8-staff-gutted-following-split-with-auctionata-as-co-founder-departs-company-7779/. ↑ Proposed Disclosure Statement to Accompany Chapter 11 Plan of Liquidation at 15, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. Aug. 26, 2021) (Doc. No. 238). ↑ Michael J. de la Merced, Paddle8, Online Art Auctioneer, Is Merging with Swiss Tech Company, THE NEW YORK TIMES (Jan. 23, 2018), https://www.nytimes.com/2018/01/23/business/dealbook/paddle8-bitcoin-blockchain.html. ↑ Paddle8 Merges with The Native, And Bets Everything on Cryptocurrencies, HAPPENING (Jan. 24, 2018), https://www.happening.media/category/magazine/en/news/3173/paddle8-merges-with-the-native-and-bets-everything-on-cryptocurrencies. ↑ Id.; Angela M.H. Schuster, Paddle8's Izabela Depczyk on the Auction House of the Future, ROBB REPORT (Dec. 21, 2018), https://robbreport.com/muse/discoveries/paddle8s-izabela-depczyk-auction-house-of-the-future-2836237/. ↑ Proposed Disclosure Statement to Accompany Chapter 11 Plan of Liquidation at 15, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. Aug. 26, 2021) (Doc. No. 238). ↑ Eileen Kinsella, Creditors Are Chasing Bankrupt Auction House Paddle8's Former CEO for Allegedly Mishandling Funds to the Tune of $1 Million, ARTNET (May 12, 2020), https://news.artnet.com/art-world/paddle8-creditors-target-former-ceo-1859673. ↑ Id. ↑ See Eileen Kinsella, Paddle8 Is Filing for Bankruptcy — and it Owes Tens of Thousands of Dollars to Justin Bieber, Jay Z's Foundation, and Others, ARTNET (Mar. 17, 2020), https://news.artnet.com/art-world/paddle8-bankruptcy-1806951. ↑ Declaration of Peter Rich at 2, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. Mar. 20, 2020) (Doc. No. 8). ↑ The New American Cinema Group, Inc. v. P8H, Inc., Index No. 651595/2020 (N.Y. Sup. Ct. Mar. 10, 2020). ↑ Voluntary Petition for Non-Individuals Filing Bankruptcy, In re P8H, Inc., Case No. 20−10809−smb (Bankr. S.D.N.Y. Mar. 16, 2020) (Doc. No. 1). ↑ Declaration of Peter Rich at 2, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. Mar. 20, 2020) (Doc. No. 8). ↑ Declaration of John Jenkins at 4, In re P8H, Inc., Case No. 20−10809−smb (Bankr. S.D.N.Y. May 8, 2020) (Doc. No. 46). ↑ Motion of Creditor Lisa Cooley LLC at 2, In re P8H, Inc., Case No. 20−10809−smb (Bankr. S.D.N.Y. Jul. 14, 2020) (Doc. No. 115). ↑ Voluntary Petition for Non-Individuals Filing Bankruptcy, In re P8H, Inc., Case No. 20−10809−smb (Bankr. S.D.N.Y. Mar. 16, 2020) (Doc. No. 1). ↑ Declaration of Peter Rich at 1, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. Mar. 20, 2020) (Doc. No. 8). ↑ Declaration of Peter Rich at 5, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. Mar. 20, 2020) (Doc. No. 8). ↑ Id. ↑ Notice of Appointment of Trustee at 1, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. May 8, 2020) (Doc. No. 41). ↑ Application of Chapter 11 Trustee at 4, In re P8H, Inc., Case No. 20−10809−smb (Bankr. S.D.N.Y. May 27, 2020) (Doc. No. 60). ↑ Id. ↑ Chapter II Trustee's Notice of Abandonment of Certain Property of the Estate at 2, In re P8H, Inc., Case No. 20−10809−smb (Bankr. S.D.N.Y. May 29, 2020) (Doc. No. 71). ↑ Id. ↑ Id. ↑ Id. ↑ Declaration of Megan E. Noh at 12, In re P8H, Inc., Case No. 20−10809−smb (Bankr. S.D.N.Y. July 31, 2020) (Doc. No. 130). ↑ Voluntary Petition for Non-Individuals Filing Bankruptcy, In re P8H, Inc., Case No. 20−10809−smb (Bankr. S.D.N.Y. Mar. 16, 2020) (Doc. No. 1). ↑ Summary of Assets and LIabilities for Non-Individuals, In re P8H, Inc., Case No. 20−10809−smb (Bankr. S.D.N.Y. Apr. 8, 2020) (Doc. No. 20). ↑ Id. ↑ Declaration in Opposition to Application for an Order Authorizing the Retention of Kirby Aisner & Curley as Attorneys for the Debtor at 4, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. Mar. 19, 2020) (Doc. No. 5). ↑ New York Consolidated Laws, Arts and Cultural Affairs Law - ACA § 12.01. ↑ Id. ↑ Id. ↑ Declaration in Opposition to Application for an Order Authorizing the Retention of Kirby Aisner & Curley as Attorneys for the Debtor at 3, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. Mar. 19, 2020) (Doc. No. 5). ↑ Cristallina, SA v. Christie, Manson & Woods Intl., Inc., 117 A.D.2d 284, 292, 502 N.Y.S.2d 165 (1986). ↑ Proposed Disclosure Statement to Accompany Chapter 11 Plan of Liquidation, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. Aug. 26, 2021) (Doc. No. 238). ↑ Intern Order Authorizing Use of Cash Collateral at 4, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. Apr. 8, 2020) (Doc. No. 19). ↑ Complaint, Megan E. Noh. v. FBNK Finance S.à.r.l., In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. Aug. 26, 2020) (Doc. No. 141). ↑ Id. ↑ Exhibit A, Motion for Hearing, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. Mar. 23, 2020) (Doc. No. 9). ↑ Proposed Disclosure Statement to Accompany Chapter 11 Plan of Liquidation, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. Aug. 26, 2021) (Doc. No. 238). ↑ Complaint, Official Committee of Unsecured Creditors of the Estate of P8H, Inc. v. Valentine Uhovsky, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. May 1, 2020) (Doc. No. 38). ↑ Case Conference at 6, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. June 22, 2020) (Doc. No. 102). ↑ Complaint, Official Committee of Unsecured Creditors of the Estate of P8H, Inc. v. Valentine Uhovsky, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. May 1, 2020) (Doc. No. 38). ↑ Declaration in Opposition to Application for an Order Authorizing the Retention of Kirby Aisner & Curley as Attorneys for the Debtor at 3, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. Mar. 19, 2020) (Doc. No. 5). ↑ Complaint, Official Committee of Unsecured Creditors of the Estate of P8H, Inc. v. Valentine Uhovsky at 3-4, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. May 1, 2020) (Doc. No. 38). ↑ Id. ↑ Id. ↑ Id. ↑ Id. ↑ Id. ↑ Eileen Kinsella, Creditors Are Chasing Bankrupt Auction House Paddle8's Former CEO for Allegedly Mishandling Funds to the Tune of $1 Million, ARTNET (May 12, 2020), https://news.artnet.com/art-world/paddle8-creditors-target-former-ceo-1859673. ↑ Joint Motion for Entry of An Order Assigning Adversary Proceedings to Mediation at 4, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. Feb. 18, 2021) (Doc. No. 180). ↑ Id. ↑ Id. ↑ Chapter 11 Plan of Liquidation at 70, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. Aug. 26, 2021) (Doc. No. 237). ↑ Id. at 16. ↑ Id. at 19. ↑ Post-Confirmation Report at 7, In re P8H, Inc., Case No. 20−10809−dsj (Bankr. S.D.N.Y. Apr. 20, 2023) (Doc. No. 352). ↑ PADDLE8, https://paddle8.com/ (last visited May 5, 2023). ↑ Declaration of Megan E. Noh at 12, In re P8H, Inc., Case No. 20−10809−smb (Bankr. S.D.N.Y. July 31, 2020) (Doc. No. 130). ↑   Unsubscribe to no longer receive posts from Center for Art Law. Change your email settings at manage subscriptions. Trouble clicking? Copy and paste this URL into your browser: https://itsartlaw.org/2023/06/30/a-melting-ice-cube-the-bankruptcy-of-paddle8/

Get the Jetpack app to use Reader anywhere, anytime Follow your favorite sites, save posts to read later, and get real-time notifications for likes and comments. Learn how to build your website with our video tutorials on YouTube. Automattic, Inc. - 60 29th St. #343, San Francisco, CA 94110