“Who’s that walking in these woods? Why it’s Li’l Red Riding Hood”!
From “L’il Red Riding Hood” written by Ronnie Blackwell and performed by Sam the Sham & The Pharaohs
Hypebot reports that the PledgeMusic board of directors issued the following statement:
PledgeMusic is still pursuing a sale (which if it happens is likely to be via an administration) but has contingency plans for other insolvency processes if that is not achievable. [emphasis mine]
So what does this mean? I still caution artists that these posts are not legal advance and to take advice from UK insolvency counsel, and the reader should bear in mind that not only am I not a UK lawyer but I’m not a bankruptcy lawyer either. Based on a panel on the Pledge Music debacle I moderated at the Austin Bar Association with two Texas bankruptcy lawyers (who I’m sure would agree that you need to take advice from competent UK counsel) it sounds to me like the company means to pass through “administration” which is a UK insolvency procedure that can be similar to the US concept of liquidation bankruptcy as I understand it. Hence the “…via administration” reference in the Pledge board’s statement above that I highlighted.
I think it is safe to say that anyone purchasing the Pledge assets likely would be unwilling to take them without relief from any obligations to make good on Pledge’s liabilities. In the US, we have a concept of a “prepackaged” bankruptcy where there are buyers for a company’s assets from big assets down to computer monitors who are only willing to buy if they don’t get sued by the creditors. This usually involves getting creditors to agree to low or no compensation with the court blessing the entire plan. I’m not quite sure how this works in the UK since administration proceedings are not typically heard before judges as I understand it, but it sounds like it might be similar. It’s also something that tends to happen most often in a reorganization bankruptcy where the company re-emerges as a whole having shed its debts, instead of a liquidation bankruptcy where the company does not re-emerge at all.
My bet is that everyone knows that an agreement of the creditors (if artists are indeed creditors) will never happen in this case so I would expect to see some muscle being exerted, assuming that the government doesn’t step in to block any administration action pending the completion of any civil or criminal investigations that may be ongoing.
My own curbstone assessment of the board’s statement is that they are going to try to pass Pledge through administration as fast as they can. What that means for artists who were stiffed by the company is anyone’s guess at this point but clearly calls for heightened vigilance.
[Editor Charlie sez: What do the Panama Papers and Pledge Music have in common? More than you might think….]
It seems to be a distraction, unintentional, but still a distraction from the fact Pledge Music’s purportedmajority shareholder Joshua Sason, is the guy named first in the SEC complaint below.
(The other defendants Sharma and Salviola have an interesting history See here, here, hereand here. Also named is the fabulously named Zirk de Maison. He is also an interesting person: see here.)
Now this complaint doesn’t directly have anything to do with Pledge Music, but it is certainly part of the story. The majority shareholder of a company running out of money gets an SEC complaint for what appears to be a fraud perpetrated by his other company? C’mon! Anyone associated with Pledge pretending like it’s not part of the story? Well, that makes it part of the story.
If you read the complaint it alleges pretty crazy stuff. From the SEC press release that goes with the complaint:
“According to the SEC’s complaint, from approximately December 2012 to June 2013, microcap stock financier Magna Group, which was founded and owned by Joshua Sason, engaged in a scheme to acquire fake convertible promissory notes supposedly issued by penny stock issuer Lustros Inc. and then to convert those notes into shares of Lustros common stock. The defendants then sold the shares to unsuspecting retail investors, who did not know that the shares were fraudulently acquired and were being sold illegally. The defendants’ sales of the Lustros shares also had the effect of destroying the value of the Lustros shares held by the public.”
So this guy didn’t get charged because he forgot to file a form, or checked the wrong box. According to the SEC he is charged with violations usually associated with con men. And according to the SEC he didn’t do it just once:
“The complaint also alleges that in November 2013, Magna Equities II, which was also wholly-owned by Sason, and Manuel, purchased another fake promissory note from Pallas Holdings. Magna Equities II and the note’s issuer, NewLead Holdings, Ltd., later agreed to retire the fake debt in exchange for shares of the issuer through a court-approved settlement agreement. To obtain approval of the settlement, Sason and Magna Equities II falsely swore to the court that the fake promissory note was a bona fide debt of NewLead. Kautilya “Tony” Sharma and Perian Salviola, who controlled Pallas Holdings, are alleged to also have participated in the scheme.”
It was shortly after this Sason reportedly invested 3 million in Pledge Music.
Read the post on The Trichordist
[Editor Charlie sez: How do you say “ponzi”? “A&R and Campaign Managers were only told to “launch launch launch” new campaigns so that payments could be distributed to other projects. They very well knew that they were unable to pay artists, but needed to launch new campaigns in order to gain more revenue. Employees knew that this was not ethical, but at the end of the day had no choice. “
What really happened at PledgeMusic?
Here’s an email from a former employee, received earlier this week. Last week, PledgeMusic announced its intentions to declare bankruptcy, while offering no assurances that unpaid artist balances — potentially in the millions — would be repaid.
As a former employee at PledgeMusic, I have information that is useful for anyone who is interested in knowing more details about what happened to the company.
1. Dominic Pandiscia is the one to investigate….
Read the post on Digital Music News
[Editor Charlie sez: Since no US-based artist rights organization has stepped up, the subheadline could easily be “Where is the US response?”]
UPDATED: UK Music CEO Michael Dugher is leading a music industry campaign demanding that Small Business and Consumer Minister Kelly Tolhurst refer PledgeMusic to watchdogs at the UK’s Competition and Markets Authority.
“UK based PledgeMusic is entering Administration, the UK equivalent of bankruptcy. The company suspended all crowdfunding campaigns on February 4th, leaving hundreds of musicians globally owed between between $1 and $3 million….
The UK Musicians Union is asking musicians who are owed money through the platform to contact them.
Read the letter here
Read the post on Hypebot
The Music Managers Forum UK have criticized the “secrecy” arounds Spotify’s deals with major labels. According to Complete Music Update: The UK’s Music Managers Forum yesterday welcomed the news that Spotify had reached a new deal with Universal Music. However, the trade body criticised the continued secrecy that surrounds the deals made between the major […]
via Will Digital Aggregators Lead the Industry on Transparency with Spotify and Others? — Music Tech Solutions