Media Source: Law360
Various stakeholders of bankrupt ticket reseller and alleged Ponzi scheme vehicle National Events Holdings LLC have pushed back hard against a recent attempt by one creditor to lift the automatic stay and liquidate the debtor’s $5.8 million in remaining assets, calling the move premature and “grossly unfair.”
Creditors Taly USA Holdings Inc. and Hutton Ventures LLC, as well as National Events itself and a court-appointed receiver for two affiliated entities, all condemned Falcon Investment Advisors LLC’s request last week to lift the stay and collect on liens secured by “substantially all of the debtor’s assets.”
Falcon, National Events’ biggest investor, had put roughly $45 million into the ticket reseller and controlled one of its two board seats when it filed for bankruptcy on June 5, according to oppositions and responses filed Friday. National Events' sole remaining assets consist of yet-to-be-sold tickets and insurance policies.
Falcon also put forward a $485,000 debtor-in-possession loan at National Events’ first-day hearing earlier this month, but U.S. Bankruptcy James L. Garrity shot the plan down, due to clauses in the DIP loan that would have recognized Falcon’s liens on National Events and released claims against it, among other things. Falcon withdrew the offer early last week and filed its motion to lift the stay two later.
Given Falcon’s role in the bankruptcy filing, the investor's “overly aggressive” moves in the case have raised the suspicions of the other stakeholders, which want a full investigation of National Events before any one creditor is repaid, the filings said. Taly, Hutton and the receiver all stopped just short of accusing Falcon of being complicit in the scheme that brought National Events down.
“The stay relief motion is a thinly veiled attempt to get by force the very relief this court previously denied” in the DIP motion, Taly and Hutton wrote in a joint opposition. “If granted, the stay relief motion would permit Falcon to not only ‘jump ahead of the line’ but, more importantly, take dominion and control over the only known tangible asset of these estates — the ticket inventory.”
Falcon has said that the value of National Events tickets is declining by the day, but Taly, Hutton and the receiver all said it had given no proof to support that allegation.
Diamond wholesaler Taly is owed roughly $16 million by National Events, while Hutton is owed about $10 million, according to court documents. Hutton appears to be affiliated with private equity firm Hutton Capital Management.
Joseph T. Moldovan of Morrison Cohen LLP, who represents Taly, told Law360 he hopes that the court will not allow, “in the infancy of these cases, a single party whose rights and claims are far from clear to seize assets that may very well belong to other or perhaps all creditors of these estates.”
National Events began to unravel last month after its founder and CEO, Jason Nissen, admitted to Taly executives that he had been running the previously legit business as a Ponzi scheme since at least 2015.
Taly sued Nissen himself shortly thereafter in New York Supreme Court, and National Events filed for bankruptcy just hours after a receiver was appointed for two Nissen-affiliated entities that own 76 percent of the debtor — National Events of America Inc. and New World Events Group Inc.
In his response to Falcon’s motion to lift the stay, receiverEdward J. LoBello said National Events’ decision to file for Chapter 11, despite “the undeniable fact that the person with authority to do so” was the receiver, raised the question of who was on National Events' board and who was calling the shots.
“The answer is troubling: only the debtors’ prepetition CFO and a Falcon appointee,” LoBello wrote. “That’s it.”
LoBello also said that Falcon had replaced its board member just before the bankruptcy filing, and that National Events’ newly appointed chief restructuring officer “appears to have long-standing ties to Falcon.” The receiver stressed that his investigation is still in its early stages and that he would not draw any conclusions about either piece of information just yet.
Taly and Hutton noted that “when [Falcon’s] counsel stood before the court and argued strenuously for the approval of the DIP motion” at the first-day hearing, Falcon made “no mention of the fact that it was half the debtor’s board when the debtor ‘agreed’ to the DIP motion.”
“Now, a few days later, Falcon comes to the Court seeking an order permitting it to seize its purported collateral knowing full well that any such relief would effectively destroy the debtors’ ... ability to conduct a fulsome investigation,” Taly and Hutton wrote.
National Events’ first-day hearing was a somewhat chaotic affair, with lawyers for National Events’ employees, the debtor itself and all three creditors telling Judge Garrity that no one was quite sure what had happened at the company.
Judge Garrity cited that confusion when he declined to approve Falcon’s interim DIP motion, since withdrawn, saying he would take it up again in a week when he had more information.
Taly organized a meeting at its offices last week after that hearing, it said in the filing, and all of the stakeholders in the case showed up — except Falcon.
“Rather than attend the meeting to discuss a path forward … Falcon directed its counsel to remain at his office to dedicate his time and effort to drafting the stay relief motion,” Taly and Hutton wrote.
Hutton, National Events and LoBello declined to comment, while Falcon did not respond Monday to a request for comment.
National Events is represented by Stephen B. Selbst and Hanh V. Huynh of Herrick Feinstein LLP.
Taly is represented in the bankruptcy by Joseph T. Moldovan of Morrison Cohen LLP.
Hutton is represented by Gerard S. Catalanello and James J. Vincequerra of Alston & Bird LLP.
Falcon 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.
The 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 civil case is Taly USA Holdings Inc. et al. v. Nissen et al., case number 652865/2017, in the Supreme Court of the State of New York, County of New York.