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2015 Benefit Art Auction at the Headlands Center for the Arts. Photo: Mido Lee Productions.

Paddle8 Bankruptcy Trustee Launches $6 Million Suit Against Former Member of Board of Directors

Megan Noh, Chapter 11 bankruptcy trustee of defunct online auction house Paddle8, this week filed suit in US Bankruptcy Court, Southern District of New York, against John Textor, an alleged member of the company’s board of directors, Artnews reports. The suit seeks $6 million plus interest from Textor and an additional $1 million plus interest from companies with which he has been affiliated, on claims that Textor showed a “reckless disregard for his duties” by placing the interests of his own companies ahead of those of Paddle8’s shareholders and creditors.

Paddle8, which launched in 2011, was an online art marketplace popular with nonprofits that used it to raise money for charity by auctioning off works. The company filed for Chapter 11 bankruptcy early in 2020 after the New American Cinema Group sued over unremitted funds from a charity auction, triggering a landslide of suits from other entities who were owed money.

According to Noh’s suit, Textor, at the time senior executive and director of a company then known as FaceBank, was elected to Paddle8’s board of directors in November 2019, at which time FaceBank, through a subsidiary, owned a 51 percent stake in the online platform. The filing alleges that Textor “engaged in acts of gross mismanagement and disloyalty” that kept the company from paying its creditors, and that he failed to access a line of credit to do so in order to protect “his personal financial interests.” Noh additionally accuses Textor of having “knowingly caused or permitted the misappropriation of funds generated from [Paddle8’s] online auctions and storefront sales, including charity auctions, to be used to pay the [company’s] operating expenses” instead of paying back nonprofits who were owed money.

Textor denies ever having been a board member, claiming instead to have been an employer of a lender also seeking recovery. Swiss firm FBAG, which owned FaceBank, loaned Paddle8 $10 million in March 2019.

Noh, who was named trustee in May 2020 following the resignation of all of Paddle8’s board members, claims that “as a result of the deteriorating financial results, [Paddle8’s] board of directors refused to approve a budget for the company for the year 2020” and that by the beginning of the year, the online sales platform was in arrears to the nonprofits with which it had partnered on charity auctions.

Textor refutes the allegations. “We made it clear from the day we showed up that we wanted no collection of our secured debt, if artists and nonprofits had not first achieved full recovery. . .We knew the charities relied on those funds more than we did, and we wanted to see a perfect resolution.”