Creditors of bankrupt ticket reseller and alleged Ponzi scheme vehicle National Events Holdings LLC gathered Friday in New York bankruptcy court, to begin what all sides agreed will be a long, complicated process of sorting out the company’s tangled relationships and $70 million in debt.
During the first-day hearing attorneys representing National Events, several of its employees and a handful of creditors all told U.S. Bankruptcy Judge James L. Garrity they weren’t sure how to proceed just yet, but wanted to keep the delicate situation “in a box” until they had more information, as one attorney put it.
Judge Garrity approved a handful of standard first-day motions, but shot down a request by National Events for approval of an interim $485,000 debtor-in-possession loan from Falcon Investments, which has a 24 percent equity stake in National Events and is owed more than $40 million by the company.
“We’ve got a situation where we have a melting ice cube, with a lot of questions and a lot of moving parts,” Judge Garrity said. “I want to go about this in a more deliberate way, but I also realize we can’t just let this sit.”
Judge Garrity said he’d reconsider the motion on Friday, but said he was happy to approve an order that would allow National Events to use the roughly $70,000 in cash the company has on hand to keep the lights on in the meantime.
National Events did legitimate business as a ticket reseller, but prosecutors say founder and CEO, Jason Nissen, also starting using the company as a front for a Ponzi scheme in 2015. Nissen allegedly told investors he was using their money to purchase and resell tickets for Broadway shows such as "Hamilton," concerts and sporting events, but instead paid for personal expenses and used the money coming in to pay back other investors.
To the surprise of Judge Garrity and many of the other parties, attorneys from Morrison Cohen LLP also told the court they’re prosecuting a parallel case against Nissen in New York Supreme Court, on behalf of Taly Diamonds. Taly invested roughly $32 million with Nissen and is still owed more than $16 million, the complaint says.
That court recently appointed a temporary receiver, Edward J. LoBello, to take control of two Nissen affiliated entities — National Events of America Inc. and New World Events Group Inc. — that collectively own a controlling 76 percent equity stake in the debtor. As receiver, LoBello has the right to conduct an investigation and pursue claims on behalf of those entities, and also to put them into bankruptcy.
“For now, we would like to keep everything in a box,” Morrison Cohen’s Joseph T. Moldovan told the court. “Mr. LoBello is still deciding how and whether to exercise his powers, and we don’t want anything that happens in the bankruptcy case to affect our ability to do things in that case, and vice versa.”
Further underscoring the complexity of the case, Taly’s complaint against Nissen also contains a major bombshell that could hamstring the government’s ongoing corruption case against hedge fund magnate Murray Huberfeld and Norman Seabrook, the former head of the New York City correction officers union.
The pair are accused of forging an unholy alliance between 2013 and 2015, in which Seabrook received kickbacks for sending Huberfeld $20 million in retirement investment business.
Jona Rechnitz, the government’s star witness in that case, is identified as a longtime recruiter for Nissen in a secretly taped conversation between Nissen and several Taly executives, in which he confesses to running National Events as a Ponzi scheme.
Nissen says that Rechnitz doesn’t “know anything” about the Ponzi scheme in the transcript, but says he threatened to “go to the Feds if Weinberger doesn’t get paid,” referring to hedge fund manager Michael Weinberger, who also invested with Nissen.
That exchange could potentially badly hurt Rechnitz’s credibility in the government’s case against Huberfeld and Seabrook.
Rechnitz is referred to as “John,” “Joan” and “Jonah” in the transcript, but one attorney familiar with the cases confirmed to Law360 that Nissen is talking about Rechnitz.
Nissen allegedly confessed to other employees at National Events shortly after confessing to Taly manager Yaron Turgerman in early May, and the company fired him as CEO the same day.
National Events has since then pared itself back to a handful of employees from the 20 or so it formerly employed and also shut down its website.
Edgar DeLeon, of the DeLeon Firm PLLC, represents some of National Events’ employees, and told the court his clients were asked by Nissen to put more than $140,000 in company expenses on their personal credit cards, a statement that drew a gasp from Judge Garrity.
National Events subsidiaries subsidiaries National Event Co. II LLC, National Event Co. III LLC, National Events Intermediate LLC and World Events Group LLC also filed for bankruptcy last week.
National Events is represented by Stephen B. Selbst and Hanh V. Huynh of Herrick Feinstein LLP.
The case is In re: National Events Holdings LLC, case number 11:17-bk-11556, in the U.S. Bankruptcy Court for the Southern District of New York.
Taly is represented in the bankruptcy case by Joseph T. Moldovan of Morrison Cohen LLP.
The bankruptcy case is In re: National Events Holdings LLC, case number 11:17-bk-11556, in the U.S. Bankruptcy Court for the Southern District of New York.
The Supreme Court case is Taly USA Holdings Inc., et al. v. Jason Nissen, et al., case number 652865/2017, in the Supreme Court of the State of New York.