Edward LoBello Mentioned in Law360, "Subpoenas 'Out The Door' In National Events Ponzi Probes"

Two parallel investigations into the $70 million National Events Ponzi scheme are humming along, as a New York bankruptcy court on Tuesday approved several motions that will tie up loose ends while the defunct ticket reseller waits on responses to a flurry of recently issued subpoenas.

The jointly administered case covers two separate but closely related debtors: National Events Holdings LLC and National Events of America Inc. Both companies filed for bankruptcy over the summer after their founder and former CEO Jason Nissen admitted to investors he’d been running the formerly legit ticket reseller as a Ponzi scheme for at least two years.

Creditors have wanted to know what happened to the $70 million lost in the fraud ever since, and each debtor is currently pursuing its own investigation into exactly that question — and any causes of action that crop up while answering it. Both debtors have filed roughly a dozen subpoenas each as part of a wide-ranging discovery probe into big banks and other financial institutions, and internal investigations into prepetition books and records remain ongoing.

On Tuesday, U.S. Bankruptcy Judge James L. Garrity extended the exclusivity period to file a Chapter 11 plan until February of next year for National Events of America Inc.

William C. Heuer of Westerman Ball Ederer Miller Zucker & Sharfstein LLP, who represents the state court-appointed trustee Edward J. LoBello in the Inc. case, told the court he expects the plan to be a liquidation, but that the trustee needs more time to do a thorough job.

Heuer also told the court the trustee has met extensively with the debtor’s creditors, as well as Nissen and his counsel in a separate criminal case. Now the investigation hinges on further analysis of the debtor’s books and records and responses to subpoenas issued to JPMorgan Chase, Citibank NA, Wells Fargo Bank NA and other financial institutions.

“The subpoenas are out the door, and we’re just waiting on responses,” Heuer told the court. “We also spent several hours speaking with Nissen about the debtor’s books and records and manner of bookkeeping.”

LoBello was appointed as the receiver for both debtors in a state court action filed by diamond wholesaler and unsecured creditor Taly USA Holdings Inc. shortly after Nissen copped to the fraud at a May meeting with Taly executives, and is now the "estate fiduciary" for the Inc. case. The Inc. case is being funded by a $280,000 debtor-in-possesion loan from Taly and another unsecured creditor.

Judge Garrity also approved two small deals in the Chapter 7 case of National Events Holdings LLC.

The first provides a release of all claims to Volpone Enterprises LLC in exchange for $25,000 given to the debtor’s estate, while the second allows the debtor to preserve a contract that entitles it to purchase U.S. Open tickets for next year at a bulk rate.

National Events LLC and Volpone both owned a 40 percent stake in ticket resale software company Concierge Live LLC, according to court filings, and the deal essentially allows the debtor to sanction secured creditor Falcon Investment Advisors LLC’s sale of the debtor’s 40 percent stake to Volpone.

Falcon, National Events’ only secured creditor, was allowed to lift the automatic stay and collect on the debtor’s assets back in July, which totaled roughly $730,000. Falcon, which previously held a seat on the debtor’s three-man board, says it lost nearly $44 million when the fraud unraveled.

The LLC case was converted to Chapter 7 the same month, after Judge Garrity declined to let Falcon extend a DIP financing package to the LLCs to fund an investigation, saying he had problems with allowing “the debtor to investigate itself.”

Kenneth Silverman of Silverman Acampora LLP has been appointed as the Chapter 7 trustee in that case, and his investigation is also ongoing.

Neither Silverman nor LoBello gave any indication of what they’ve uncovered thus far in their investigations, but they have the potential to get interesting, at least for those who follow New York City politics.

Jona Rechnitz, a former donation bundler for NYC Mayor Bill de Blasio and the government’s star witness into two New York Police Department corruption probes, was also a top salesman for Nissen. Rechnitz made at least $6 million on commission by bringing wealthy investors to the National Events Ponzi scheme, according to documents filed in Taly’s state court suit.

Rechnitz was allegedly at the heart of a wide-ranging influence peddling scheme in which he and a partner purportedly used NYPD officers as hired muscle in exchange for a steady stream of money, sports tickets and prostitutes. He’s also accused of helping to orchestrate a kickback scheme involving the NYPD pension fund.

The hedge fund case ended in a mistrial last week, while Rechnitz testified in front of a jury in the influence peddling case earlier this month.

Silverman is represented by Ronald Friedman and David J. Mahoney of Silverman Acampora LLP.

Taly is represented in the bankruptcy by Joseph T. Moldovan and Robert K. Dakis of Morrison Cohen LLP.

Falcon is represented by Joel H. Levitin, Brian T. Markley and Richard A. Stieglitz Jr. of Cahill Gordon & Reindel LLP.

Edward J. LoBellois represented by William C. Heuer of Westerman Ball Ederer Miller Zucker & Sharfstein LLP.

An unofficial group of unsecured creditors is represented by James M. Sullivan of Windels Marx Lane & Mittendorf LLP.

The National Events Holdings LLC 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 National Events of America Inc. bankruptcy is In re: National Events of America Inc., et al., case number 17-11798, 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.

The criminal case is U.S. v. Nissen, case number 1:17-cr-00477, in the U.S. District Court for the Southern District of New York.