Law360, New York (January 5, 2018, 8:35 PM EST) -- The court-appointed examiner in the Chapter 11 case of alleged Ponzi scheme vehicle National Events Holdings LLC has cleared one of the defunct ticket reseller’s main creditors and debtor-in-possession lender of any wrongdoing in a report filed with the New York bankruptcy court.
Diamond wholesaler Taly USA Holdings Inc. loaned National Events roughly $57 million over the past five years, and several of its executives were on friendly terms with Jason Nissen, the ticker reseller’s founder and former CEO.
He admitted in May that he’d been operating the formerly legit ticket reseller as a Ponzi scheme for at least two years at a May 2017 meeting with Taly executives at Taly’s Manhattan office.
But in a report filed Thursday, independent examiner Alan D. Halperin told the court Taly had not been involved in the $70 million fraud that brought down National Events, as far as he could tell.
“Despite these longstanding business and personal relationships, the examiner found no evidence during the course of his investigation from which he could conclude that Taly had any knowledge of Nissen’s fraud prior to May 7, 2017, or in any way furthered that fraud or participated in it,” the examiner wrote.
National Events filed for bankruptcy shortly after that May meeting, and during the bankruptcy some creditors raised suspicions that Taly and the company’s other major creditor, Falcon Investment Advisors LLC, had been in on the Ponzi scheme.
Nissen has since been arrested and is currently facing wire fraud and other charges. Taly also sued him in New York state court just days after his confession.
In addition to being a major creditor of National Events and a victim of the fraud, Taly also served as the company’s debtor-in-possession lender, advancing a $280,000 funding package that was mostly intended to finance two separate investigations into any possible causes of action the debtor might have against third parties, including Taly.
Another investigation by Edward J. LoBello, the “estate fiduciary” — a position similar to a trustee — remains ongoing. National Events filed for bankruptcy alongside National Events of America Inc., a holding company previously controlled by Nissen.
That case has been converted to a Chapter 7 liquidation, where a court-appointed trustee is currently conducting his own investigation.
Halperin says his investigation focused solely on Taly after it was determined that no other persons or entities “fall within the scope of the investigation,” although no further details were given.
Halperin says his report was based on an analysis of the debtor’s books and records, Nissen’s emails, and informal interviews with him, National Events employees and representatives of its creditors. He says he decided not to issue subpoenas based on the cost of doing so and the low likelihood of turning up any new information not obtainable in a less formal setting.
Nissen was first introduced to Taly’s executives through Jona Rechnitz in 2011 or 2012, the report says.
Rechnitz, a former donation bundler for New York Mayor Bill de Blasio and the government’s star witness for two New York Police Department corruption probes, was also a top salesman for Nissen. Rechnitz made at least $6 million on commissions by bringing wealthy investors to the National Events Ponzi scheme, according to documents filed in Taly’s state court suit.
Taly is represented in the bankruptcy by Joseph T. Moldovan and Robert K. Dakis of Morrison Cohen LLP.
Falcon Investment Advisors is represented by Joel H. Levitin, Brian T. Markley and Richard A. Stieglitz Jr. of Cahill Gordon & Reindel LLP.
Edward J. LoBello is represented by William C. Heuer of Westerman Ball Ederer Miller Zucker & Sharfstein LLP.
An unofficial group of unsecured creditors is represented by James M. Sullivan of Windels Marx Lane & Mittendorf LLP.
The National Events Holdings LLC bankruptcy is In re: National Events Holdings LLC, case number 1:17-bk-11556, in the U.S. Bankruptcy Court for the Southern District of New York.
The National Events of America Inc. bankruptcy is In re: National Events of America Inc. et al., case number 17-11798, in the U.S. Bankruptcy Court for the Southern District of New York.