Beleaguered SFX Founder Robert Sillerman has filed for bankruptcy and is warning his new company, Function(x), could also face insolvency issues in the near future.
Earlier this month, Sillerman requested a judge convert his Chapter 7 bankruptcy filed by the founders of React Presents and Clubtix into a voluntary Chapter 11 bankruptcy (first reported by IQ Magazine). Converting to a chapter 11 bankruptcy allows him to continue to partially control his financial affairs while the bankruptcy winds its way through court. Lawyers for React Presents’ Lucas King and Jeffrey Callahan asked a federal bankruptcy judge to push Sillerman into Chapter 7 bankruptcy over an unpaid $7.4 promissory note after the pair won a judgment against Sillerman.
His bankruptcy could mean the end of Function(x), his click-bait company created after a similar SFX style rollup of aggregate content sites like women’s news site wetpaint.com and millennial sports site rantsports.com. In an 8K filing dated Feb. 9, Sillerman warns that he has “historically provided financial support to the Company in form of cash and guarantees of Company’s obligations” but due to the circumstances surrounding bankruptcy, he is “unable to provide financial support to the Company in the foreseeable future” and warned “there are no assurances the Company will be able to secure an alternative source of funding.”
Function(x) already had a rough run in 2017, laying off three-quarters of the staff in September and seeing the company delisted from the NASDAQ exchange last summer for failing to file quarterly reports in a timely matter. The crash of Function(x) would be his second bankruptcy in two years — in 2016, Sillerman’s dance music and EDM company SFX filed for bankruptcy amid accusations of fraud and allegations that Sillerman lied about efforts to take the company private in order to boost its stock price. SFX emerged from bankruptcy later that year, rebranded as LiveStyle and controlled by its senior creditors. It’s now helmed by former AEG executive Randy Phillips and HARD founder Gary Richards.
Since the bankruptcy, Sillerman has had a rough ride, becoming the subject of a SEC investigation for allegedly misappropriating $6.6 million from his company Function(x), which led to the protest resignation of auditing firm BDO. An audit found that Sillerman allegedly broke the law when he transferred $6.1 million into his own personal account and withdrew $500,000 in cash “with no explanation” and “no supporting documentation.”
He was also sued by a luxury real estate firm for breach of contract after he allegedly cut the firm out of a $114 million real estate deal and didn’t pay their commissions. In December 2016, former SFX board member Mitch Slater sued Sillerman for an unpaid $2.5 million loan from 2015.