After Auction Platform Goes Bankrupt, Organizations Raise Funds to Recover Losses

Works by Lisha Bai, Tiffany Smith, Sangram Majumdar, Leeza Meksin and Erin O’Keefe included in Ortega y Gasset Projects’ Paddle8 fundraiser in December (images courtesy of Ortega y Gasset Projects)

For creditors of online auctioneer Paddle8, which declared bankruptcy last month, the timing couldn’t have been worse. As the cultural sector steps up its emergency relief efforts to mitigate the devastating impact of the coronavirus pandemic, organizations that have not been paid by the now insolvent company are facing a dual challenge: enduring the crisis. while trying to recoup their losses.

In early March, the New American Cinema Group in New York sued the company for allegedly misappropriating funds from its November charity auction; a week later, Paddle8 filed for bankruptcy.

Paul Cossu, attorney for the New American Cinema Group, told Hyperallergic, “Paddle8’s decision to rush to file for Chapter 11 bankruptcy in order to prioritize the interests of its shareholders and executives over nonprofit organizations. nonprofit from which he embezzled is particularly troubling in light. difficult financial circumstances that so many small nonprofits are experiencing due to the pandemic.

Now some of the affected organizations are launching fundraisers to recoup money they had already raised through charity sales on the platform – but never received.

In November 2019, Bushwick-based artist-run gallery Underdonk held an auction through that raised $15,880 in sales of artwork donated by artists, including Katherine Bradford and Danielle Orchard. Laura Frantz, a founding member of Underdonk, told Hyperallergic that she herself hand-delivered the works sold to collectors. But as of February 1, when Paddle8 had promised payment, the gallery had still not seen the funds.

Struggling to stay afloat during the current crisis without the funds they had budgeted, Underdonk launched its own fundraiser. “Artists who have generously donated works have not received their percentage, and the funds that help us operate as a space cannot be found,” read a statement on the gallery’s website.

Danielle Orchard’s oil on canvas painting ‘Bather with Plant’ (2019) was included in the Underdonk’s Paddle8 sale (courtesy the artist and Jack Hanley Gallery)

In response to Hyperallergic’s request for comment, Paddle8 said it has sought protection under Chapter 11 of the Bankruptcy Code and “will work cooperatively with our creditors to come up with a plan to satisfy our obligations to our organizations at nonprofit and our shippers”.

According to Paddle8’s Chapter 11 bankruptcy petition, the company has more than $10 million in liabilities and less than $50,000 in assets. Its list of creditors includes well-known names, including Jay-Z’s Shawn Carter Foundation and Justin and Hailey Bieber, to whom the company owes $65,000 and $73,000, respectively. The Rema Hort Mann Foundation in New York, a nonprofit organization dedicated to supporting emerging artists, also lost funds from its recent auction.

Despite any consolidated prospects for future payments by Paddle8, affected arts organizations have immediate financial responsibilities, such as rent, that they must continue to meet even as the pandemic reduces income from art sales and memberships. In Underdonk’s case, Frantz says, the gallery typically doesn’t have a steady influx of income from art sales; he was counting on the profit auction to make ends meet.

“We could have withstood the coronavirus pandemic with our membership dues and Paddle8 auction money,” Frantz said. “We now have to raise the funds ourselves to cover our operational expenses and fulfill our obligations to the artists.” Underdonk hopes to hold a sale of small works on paper in mid-May to help keep the gallery open.

Works by Leeza Meksin, Erin O’Keefe and Keisha Prioleau-Martin were also sold at OyG Projects’ Paddle8 auction.

Ortega and Gasset projects (OyG Projects), a curatorial collective and non-profit exhibition space, had mounted a physical exhibition of the works included in its Paddle8 auction in December 2019, hoping to provide an immersive experience in addition to selling online. At its own expense, OyG Projects installed just under 50 pieces in a salon-style group show at the gallery’s headquarters in Brooklyn’s Gowanus neighborhood, serving wine donated by Red Hook Winery.

Eric Hibit, one of the co-directors of the OyG projects, said he received confirmation from Paddle8 in early December that the funds would be disbursed by January 15, within the 30-day payment terms of their contract. But as the weeks passed and the payment did not reach OyG’s account, it became uncertain. Follow-up emails to the company were met with general messages of reassurance, insisting the gallery was a “top priority” and apologizing for the delay. In another email, Hibit says, Paddle8 mentioned needing time to finalize payments with their new card.

“I started to worry towards the end of January when the payment became 15 days late. In mid-February, I was very worried,” Hibit said.

When he learned that Paddle8 would not repay his debt, the non-profit turned to his supporters. “We have been financially devastated by the snowball effect of Paddle8’s bankruptcy and COVID-19,” read a post on his Instagram announcing an emergency fundraiser.

Cossu, who is not affiliated with Underdonk or OyG Projects, describes the need to re-collect amounts owed by Paddle8 from previous fundraisers as “a cruel irony”. But thanks to the donations received so far, OyG Projects is now on the verge of recovering the amount lost due to bankruptcy. “Although we were heartbroken by the original Paddle8 news, we were heartened by the outpouring of support,” Hibit said.

“OyG is an artist-run non-profit organization whose mission is to support artists by creating exhibition opportunities. We really feel that our community has gone through for us.

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