The online auction house Paddle8 has filed for Chapter 11 bankruptcy protection in New York. This comes after the company was sued for allegedly misappropriating funds from a charity auction.
On March 10th, the non-profit New American Cinema Group filed a lawsuit against Paddle8, alleging that the auction house was withholding funds from a benefit sale it hosted in November last year.
Now, the auctioneer’s decision to file for bankruptcy has raised concern with the New American Cinema Group’s attorney, Paul Cossu.
Cossu told Artnet that Paddle8’s board director, Peter Rich, acknowledged Paddle8’s payment obligations to the non-profit charity in writing less than a week ago.
A spokesperson for Paddle8 told Private Art Investor that it was undertaking Chapter 11 bankruptcy protection to protect the company and its assets aggressive legal manoeuvring that would be harmful to its clients.
“The safe harbour of Chapter 11 allows us to work cooperatively with our senior creditors to prioritize the non-profits with whom we have long-standing relationships. We are not shuttering the business. This decision was made to protect our partners and preserve the business,” said a Paddle8 spokesperson.
Creditors listed in Paddle8’s bankruptcy petition include pop star Justin Bieber and his wife Haley, who are owed $73,000. Jay Z’s Shawn Carter Foundation is also listed as a creditor and is owed just over $65,000.
The Rema Hort Mann Foundation, the non-profit founded by top New York City-based collectors Susan and Michael Hort is also owed just over $100,000.