Following Paddle8 Bankruptcy Filing, Former CEO Sued for $1 Million

A group of unnamed creditors are suing online auction house Paddle8’s former chief executive Valentine Uhovski for $1 million, in addition to legal fees and interest, reports the Art Newspaper. Filed in bankruptcy court in the southern district of New York on May 1, the suit accuses Uhovski—who joined the auction house from Tumblr in November 2019, only to step down in February—of engaging in “acts of gross mismanagement and disloyalty.” It claims he misappropriated funds and used profits from sales and charity auctions to cover the company’s operating expenses.

The suit comes on the heels of several legal actions against the company. In March, the artist-run nonprofit Film-Makers’ Cooperative—a division of and the operational name of the New American Cinema Group—filed a complaint alleging that the company misappropriated funds from a charity auction held last November, which included donated works by artists such as Jim Jarmusch, John Ahearn, Kiki Smith, and Walter Robinson. Among the bankruptcy creditors listed in the suit are the Rema Hort Mann Foundation, which claimed it was owed around $100,000; Jay-Z’s Shawn Carter Foundation, which was looking to collect $65,000; and celebrities Justin and Hailey Bieber. One week after the suit was filed, the auction house filed for Chapter 11 bankruptcy protection, which protects companies as they reorganize their debt.

“We are deeply concerned by Paddle8’s bankruptcy filing, particularly given that the director of Paddle8’s board, Peter Rich, specifically acknowledged Paddle8’s payment obligations to the nonprofit charity in writing less than a week ago, and assured us that Paddle8 had ‘made arrangements to settle your client’s monies due immediately,’” Paul Cossu, an attorney for the New American Cinema Group, told Artnet News back in March. “It now appears that this was nothing but a bad-faith stalling tactic to buy Paddle8 time to wire money that should be going to charities to its lawyers.”

In recent months, smaller galleries have also reported that Paddle8 failed to remit payments. Brooklyn’s Ortega y Gasset Projects is still waiting for $12,000 from a Paddle8 auction held last December, Underdonk Gallery said it never received the $15,880 from a benefit auction in November, and Chicago’s artist-run space Prairie is expecting at least $16,000 from a February auction. The lost funds also affect the artists who donated their works and were slated to receive a percentage of the proceeds.

In an email to Artnews, Uhovski said: “I was blindsided by this bizarre suit, as was nearly every wonderful colleague that I’ve worked with. During my time as a leader for CEO my priority was fighting for the brand, employees, and partners we love. The owner made that commitment impossible, and I left the company in February after months of deceit and misinformation. A lot of pain was brought on to the staff, and the organizations and this is just the latest ruthless blow. I have every piece of evidence to back up my work and integrity and will not tolerate these hurtful lies.”

Paddle8 was founded in 2011 by Alexander Gilkes, Aditya Julka, and Osman Khan, and was one of the first online platforms specializing in the art world’s “middle market.” It announced a high-profile merger with the Berlin-based online auction house Auctionata in 2016, but the partnership dissolved a year later when Auctionata filed for insolvency.