Many artists and fans lost a lot of money in Pledgemusic’s scams and it looks like they won’t reimburse anyone the money they’ve lost plus the executives such as Benji Rogers are going to escape any criminal and civil wrongdoing. Not so fast!
As we reported yesterday, we have confirmed through sources that there is an ongoing Federal Investigation looking into Pledgemusic and it’s executives including Benji Rogers to determine if any US laws have been violated.
What does “winding up” or “administration” means in US terms? We will try and explain in more simplistic terms.
Pledgemusic is leaving artists on the hook for a total sum estimated to be between $1 million and $3 million — in the British legal terminology used in the proceedings for the UK-based company: “administration” instead of bankruptcy; “winding up” instead of liquidation.
A “winding up” order was made against the company on July 31, with the trade organization UK Music calling on the government to take urgent action and investigate the company.
Why has Pledgemusic chosen Liquidation instead of Bankruptcy? Now that an “Official Receiver” has been appointed for PledgeMusic in the UK?
Pledge had a choice between “administration,” which is somewhat like a reorganization where the company continues operating after renegotiating its debts and liabilities, and “wind up,” which is somewhat like a liquidation where the company shuts down and sells its assets to satisfy creditors. Similar to bankruptcy in the US.
After guiding fans, artists and vendors toward repaying within 90 days and then toward administration, which would mean the company could emerge and continue operating after paying off its debts and liabilities, Pledge instead chose winding up. If you look at the timeline, I think you will find that they were assuring administration was their course after they’d already filed for wind up.
[Note: PledgeMusic cofounder Benji Rogers, who left the company in 2016 but returned on a voluntary basis earlier this year, contested that claim in a blog post last week: “Pledge pursued a range of sale options with a basic hierarchy to try to achieve the best outcome for the creditors,” it reads in part. “In order for an administration to be successful any sale would have needed to generate a minimum price and although we were in contact with several interested parties, ultimately none offered that price and so we were unfortunately unable to appoint an administrator. The final and least desired option was to place the company into liquidation which was done on the 31st of July.”]
Winding up means Pledge shuts down and a government agency called the “Official Receiver” sells its assets to satisfy its creditors from the proceeds. However, the Insolvency Service told me that the Official Receiver also has the discretion to investigate why the company is being wound up and if they find wrongdoing, the Official Receiver can refer the case to other agencies for further action either civil or criminal. The Official Receiver has the power to seek to bar any of the Pledge board members from being a director in another company for up to 15 years. There are due-process rules to follow in all these situations.
What about money? Can artists or fans get any money back? The Official Receiver is employed by the Insolvency Service in the UK. Pledge has posted contact information for the Official Receiver on their website. Strangely, Pledge does not say whether there is a deadline for contacting the Official Receiver, which you’d believe they’re almost surely is, and that Pledge knows this. Imagine that? There are likely a few secured creditors, who will be banks in most cases like this, and they will get preference. If there is any money left over, that sum will be paid to the unsecured creditors proportionately. Fans, artists and vendors will likely be unsecured creditors.
While there are likely thousands of unsecured creditors, it could be that only unsecured creditors who will be counted are the ones who contact the Official Receiver and file a form, but that should be confirmed with the Official Receiver.
What can artists and fans do, if anything?
You could hire an insolvency lawyer in the UK to advise you. If that’s not attainable, I would send an email to the Official Receiver describing what happened, when it happened, your efforts at the collection and how much you believe you are owed. I would do that ASAP. You have to start somewhere and now you have someone to deal with who is obligated to respond to you and not stonewall you. You should also find out how to be notified of future actions in the case.
Even if you have little hope of getting paid anything, it is worth it to send that email so that the Official Receiver gets the full picture of the company’s behavior directly from those harmed. A core fact that needs to be confirmed, hopefully by the government, is what happened to the fans’ money? There have been reports suggesting that Pledge may have co-mingled “pledges” with their operating accounts and used new ith their operating accounts and used new contributions to pay old obligations. If that’s proven true, then that’s a totally different ball game.
The California Attorney General’s Office Consumer Protection Unit was instrumental in getting some of our readers their money back from Lance Benedict and TTM Guitars as they took payment for guitars they never shipped. The Federal Trade Commission is another potential option. While Pledge may be winding up in the UK, there may still be jurisdiction over them in the US because they operated here and solicited money from fans here. This could be a 50 state jurisdiction issue for the US alone. Policies dealing with businesses like Pledge need to be addressed on the state and federal levels in the US.
UK Music has already twice petitioned the UK Government to conduct an investigation and have been denied. It seems the UK Government has been snowballed by Pledge and Benji Rogers with their criminal behavior. Why isn’t there a group like UK Music here in the states vocalizing opposition to Pledge? With the ongoing US Federal Investigation, there could be some justice after all for artists and fans alike.