Beware of Beckett!

[Exhibitman]

"Marx, which had been approved by PSA as a group submission outlet, indicated it had taken in over $954,000 in 2020, had $4.4 million in revenue during 2021 but because of its debts, ran out of money in August."

"the company says the suspension of PSA’s lower cost services last year resulted in a disruption of its revenue. After ramping up its business in 2020 including the opening of a storefront, Marx says it “was in so much debt that all revenues were being absorbed by the daily and weekly payments to merchant banks which made loans to the business.”

"In the bankruptcy documents, Marx blamed PSA’s 2021 shutdown of most service levels on much of its troubles, but also cited another business’ failure to pay some $60,000 it was owed and two bookkeepers it hired. In its filing, Marx indicated the bookkeeper paid herself about $50,000 more than the $48,000 per year salary she was supposed to receive. Both of the company’s bookkeepers left their jobs in November of last year. It also says a customer failed to pay a $60,000 debt to the company related to card grading."

So, gross revenue quadrupled but a $110K loss ate the customer money? Suuure. The Marx guys should be going to jail for theft for what they did. Lots of businesses get money from customers in advance. Whether you call it a deposit or a retainer or an advance, it is still money paid in trust for a service. That money should have been there held in a segregated account regardless of the company's financial woes. Instead, it sounds like Marx treated it like a piggy bank and in effect ended up running a ponzi scheme.

[BobC]

Originally Posted by Exhibitman

"Marx, which had been approved by PSA as a group submission outlet, indicated it had taken in over $954,000 in 2020, had $4.4 million in revenue during 2021 but because of its debts, ran out of money in August."

"the company says the suspension of PSA’s lower cost services last year resulted in a disruption of its revenue. After ramping up its business in 2020 including the opening of a storefront, Marx says it “was in so much debt that all revenues were being absorbed by the daily and weekly payments to merchant banks which made loans to the business.”

"In the bankruptcy documents, Marx blamed PSA’s 2021 shutdown of most service levels on much of its troubles, but also cited another business’ failure to pay some $60,000 it was owed and two bookkeepers it hired. In its filing, Marx indicated the bookkeeper paid herself about $50,000 more than the $48,000 per year salary she was supposed to receive. Both of the company’s bookkeepers left their jobs in November of last year. It also says a customer failed to pay a $60,000 debt to the company related to card grading."

So, gross revenue quadrupled but a $110K loss ate the customer money? Suuure. The Marx guys should be going to jail for theft for what they did. Lots of businesses get money from customers in advance. Whether you call it a deposit or a retainer or an advance, it is still money paid in trust for a service. That money should have been there held in a segregated account regardless of the company's financial woes. Instead, it sounds like Marx treated it like a piggy bank and in effect ended up running a ponzi scheme.

Adam,

I thought the exact same thing you did. This bankruptcy filing is either due to complete business stupidity, or tantamount to intentional criminal theft, or a combination of both. Otherwise, how after more than quadrupling your business in a single year can you suddenly end up with assets less than $100K, and debts exceeding $1M. There is no major inventory or capital investments required for what they were doing. You could literally run the type of service business from your house/garage if you really had to. So, what were the monies from the debts they incurred used for? This doesn't add up at all.

For one thing, the bookkeeper that paid him/herself the extra $50K, that is embezzlement. I wonder if they pressed charges and are looking to recover at least some of that embezzled money. I would certainly expect the bankruptcy court to ask such a question. And why did they suddenly have to open up a storefront? I don't really think you'd be expecting a steady stream of customers to come walking through the door for this type of service. If so, during the pandemic and all, you're a complete idiot. And the one outfit that stiffed them for $60K, as with the embezzling bookkeeper, I'm fairly certain the bankruptcy court will be interested in the status of that potential claim as well.

I've been involved with businesses and accounting for long enough to know that this Marx bankruptcy stinks to high heaven. Just from the few details put forth in this thread, the situations screams as to the owner(s) or somebody draining money from the Marx company to put them in their current bankrupt position. And yes, I have personal experience over the years dealing with businesses and people that have embezzled or misused funds, or that have run themselves into the ground (and bankruptcy) for stupid and intentional reasons. As I had stated in an earlier post, I would hope the Marx owner(s) can be held to at least some personal liability in this case, if not potentially some criminal charges as well. Unfortunately, the way our legal system is set up, people very often walk away from such bankruptcies with little to no damage or consequences, and no liabilities to themselves personally. Many supposed great business minds seemingly use bankruptcy as an ongoing tool to get, and stay, ahead. All the while damaging and hurting countless other people and businesses, while they walk away virtually unscathed. I just wonder now what the underlying case is with this Marx company, and how that will end up?

[Exhibitman]

The way BK can be manipulated is ugly AF. For example, one of my landlord clients had a deadbeat tenant that kept filing BK without doing the supporting schedules. The court would toss it out after 60 days but it would derail the eviction case each time. My client finally had to get a court order prohibiting it, which took months and cost $10K. The tenant ultimately skated on a year of rent before filing BK for real. My client got $0 as an unsecured creditor.

[Michael B]

Originally Posted by Exhibitman

The way BK can be manipulated is ugly AF. For example, one of my landlord clients had a deadbeat tenant that kept filing BK without doing the supporting schedules. The court would toss it out after 60 days but it would derail the eviction case each time. My client finally had to get a court order prohibiting it, which took months and cost $10K. The tenant ultimately skated on a year of rent before filing BK for real. My client got $0 as an unsecured creditor.

Adam,

So true. I have run into people with multiple bankruptcies that keep getting dismissed. How I dread running PACER (Public Access to Court Electronic Records for those who do not know) for one of those people. They have learned to play the game using legal stall tactics. It takes a judge to say no and threaten criminal prosecution to stop it in some cases.

As to this Marx case, I suspect a smart DA could argue criminal charges under RICO. Interstate business activity to defraud investors. It does not matter what they intended to do it is what they did do. Additionally, if they used the USPS to send the items to PSA there could be possible mail fraud.

If PSA first came out and said that they would return the items to the individual owners at no charge and then issued a statement saying that they would return at no charge except for shipping they may run into problems. I suspect that the first statement would hold, especially if it was in writing (implied contract?), as an offer that each owner could accept. I would defer to you on contract law.

[BobC]

Originally Posted by Michael B

Adam,

So true. I have run into people with multiple bankruptcies that keep getting dismissed. How I dread running PACER (Public Access to Court Electronic Records for those who do not know) for one of those people. They have learned to play the game using legal stall tactics. It takes a judge to say no and threaten criminal prosecution to stop it in some cases.

As to this Marx case, I suspect a smart DA could argue criminal charges under RICO. Interstate business activity to defraud investors. It does not matter what they intended to do it is what they did do. Additionally, if they used the USPS to send the items to PSA there could be possible mail fraud.

If PSA first came out and said that they would return the items to the individual owners at no charge and then issued a statement saying that they would return at no charge except for shipping they may run into problems. I suspect that the first statement would hold, especially if it was in writing (implied contract?), as an offer that each owner could accept. I would defer to you on contract law.

Michael,

I'm with you in wondering if there isn't some mail fraud potential were the USPS or other carriers were used for inter-state deliveries. But in regards to what PSA was supposedly going to charge Marx submitters, the big difference to me wasn't whether they were going to charge them the postage to send their cards back, it was that in that Sports Collectors Daily article it said that PSA was going to grade their cards for free. That later post by Rich of the PSA official statement just said they'd return the cards. Based on that statement it sounded like they were just going to return the cards ungraded, exactly the opposite of what the article said. I'm waiting to get some clarification on exactly what PSA is going to do.

[Michael B]

Originally Posted by BobC

Michael,

I'm with you in wondering if there isn't some mail fraud potential were the USPS or other carriers were used for inter-state deliveries. But in regards to what PSA was supposedly going to charge Marx submitters, the big difference to me wasn't whether they were going to charge them the postage to send their cards back, it was that in that Sports Collectors Daily article it said that PSA was going to grade their cards for free. That later post by Rich of the PSA official statement just said they'd return the cards. Based on that statement it sounded like they were just going to return the cards ungraded, exactly the opposite of what the article said. I'm waiting to get some clarification on exactly what PSA is going to do.

Bob,

Yes, that is why I started that sentence with 'If'. No offense to Rich, but at this point most of it is hearsay. A direct statement of clarification in writing should clear up any questions.

[Exhibitman]

One problem: the cards may not be PSA's to return. Technically, the assets of the debtor, even if they are held for others, become part of the BK estate, unless the bailor filed a UCC-1 with the State of CA establishing that the items are theirs. PSA may hear from the BK Trustee demanding that it turn over all of the cards. They would then be sold and the proceeds used to pay creditors in order, with the bailors treated as unsecured (last in line) unless the UCC-1 was filed.

[BobC]

Originally Posted by Michael B

Bob,

Yes, that is why I started that sentence with 'If'. No offense to Rich, but at this point most of it is hearsay. A direct statement of clarification in writing should clear up any questions.

So true. This whole thing is confusing, and not pleasant for those involved.

As for your comment, saw the "if", but wasn't sure if that was your intent/meaning. Sounds like we're on the same page. LOL

[BobC]

Originally Posted by Exhibitman

The way BK can be manipulated is ugly AF. For example, one of my landlord clients had a deadbeat tenant that kept filing BK without doing the supporting schedules. The court would toss it out after 60 days but it would derail the eviction case each time. My client finally had to get a court order prohibiting it, which took months and cost $10K. The tenant ultimately skated on a year of rent before filing BK for real. My client got $0 as an unsecured creditor.

True dat!

Heck, our former President who touts his business acumen and the "art of the deal" has successfully filed bankruptcy SIX times in the 90s and 00s. Never personally though, so he always walks away free and clear. Can only imagine the number of people and businesses hurt.

I fully understand the need and purpose for bankruptcy laws, but like as in your case, very smart attorneys can take advantage of those laws in some seemingly very unethical ways. And they are perfectly legal and able to do so. Nothing personal towards you, but that is a perfect example of why many people absolutely hate attorneys.

Judges and courts have to abide by the laws in place, and though even they may agree the actions were egregious and morally/ethically wrong, they can't really do anything about it till the relevant legislative authority changes the current laws, and the relevant executive authority signs off on the changes.

I'll have to share some of my bankruptcy horror stories with you. Just a little late in the evening right now.

[chalupacollects]

[QUOTE=Exhibitman;2212771]"Marx, which had been approved by PSA as a group submission outlet, indicated it had taken in over $954,000 in 2020, had $4.4 million in revenue during 2021 but because of its debts, ran out of money in August."

"the company says the suspension of PSA’s lower cost services last year resulted in a disruption of its revenue. After ramping up its business in 2020 including the opening of a storefront, Marx says it “was in so much debt that all revenues were being absorbed by the daily and weekly payments to merchant banks which made loans to the business.”


There in bold lies the rub. These Marx people were funding their business off of loans secured by their daily credit card receipts. How it works is the processor loans you money off of your daily or monthly average of projected (read future) card dollars processed for a higher rate than something secured and then the card processor pays themselves back on a daily basis by deducting the payment from the daily receipts sent back to Marx. So if you processed $1000 per day and your loan payment is $200 per day. They would fund you $800. It actually can also work on a daily percentage.

That said, once PSA shut down, Marx could not take payments or make payments hence the cash flow problem. At least a good part of it.

[Rich Klein]

One thing to remember, and this will NOT alleviate the pain of the OP, is the grading companies are working to catch up and should be caught up by the end of the year if not earlier.

These delays in processing should be concluded and the money held should be back to pre-pandemic levels by January 2023. Little comfort to the OP but an better news FYI going forward.

[rjackson44]

This is insane

[BobC]

[QUOTE=chalupacollects;2213106]

Originally Posted by Exhibitman

"Marx, which had been approved by PSA as a group submission outlet, indicated it had taken in over $954,000 in 2020, had $4.4 million in revenue during 2021 but because of its debts, ran out of money in August."

"the company says the suspension of PSA’s lower cost services last year resulted in a disruption of its revenue. After ramping up its business in 2020 including the opening of a storefront, Marx says it “was in so much debt that all revenues were being absorbed by the daily and weekly payments to merchant banks which made loans to the business.”


There in bold lies the rub. These Marx people were funding their business off of loans secured by their daily credit card receipts. How it works is the processor loans you money off of your daily or monthly average of projected (read future) card dollars processed for a higher rate than something secured and then the card processor pays themselves back on a daily basis by deducting the payment from the daily receipts sent back to Marx. So if you processed $1000 per day and your loan payment is $200 per day. They would fund you $800. It actually can also work on a daily percentage.

That said, once PSA shut down, Marx could not take payments or make payments hence the cash flow problem. At least a good part of it.

Tim,

Here's the unanswered $64,000 question, WTF did they do with all this money they borrowed? It obviously wasn't left in the Marx business or used to buy assets still in the business. So, did they intentionally plan this to pull out or use the funds personally, and then file bankruptcy to get out of paying it back? Or maybe they made some stupid investing ot business decision(s) that led them to lose the money. As Adam pointed out before, the $60K of bad debt from one customer, plus the $50K allegedly stolen by the one bookkeeper, doesn't begin to explain the over $1M in outstanding debts they reported in their bankruptcy filing. I'm assuming (actually hoping) the court requires at least some fundamental forensic accounting be performed on the Marx company books to maybe find out what was done to really get the company in the position it is now in, and to determine to what extent the owner(s) were intentionally involved so as to decide if there are any potential civil or criminal charges or penalties they may be liable for.

[D. Bergin]

Originally Posted by BobC

Tim,

Here's the unanswered $64,000 question, WTF did they do with all this money they borrowed? It obviously wasn't left in the Marx business or used to buy assets still in the business. So, did they intentionally plan this to pull out or use the funds personally, and then file bankruptcy to get out of paying it back? Or maybe they made some stupid investing ot business decision(s) that led them to lose the money. As Adam pointed out before, the $60K of bad debt from one customer, plus the $50K allegedly stolen by the one bookkeeper, doesn't begin to explain the over $1M in outstanding debts they reported in their bankruptcy filing. I'm assuming (actually hoping) the court requires at least some fundamental forensic accounting be performed on the Marx company books to maybe find out what was done to really get the company in the position it is now in, and to determine to what extent the owner(s) were intentionally involved so as to decide if there are any potential civil or criminal charges or penalties they may be liable for.

Bob, you're the accountant, but stating they had $4.4 Million in revenue (not profit) doesn't really mean a whole lot, if as a bulk submitter they are working on tiny margins, and of that 4.4 million, they owe PSA 4.2 million in fees, their employees money, lousy book-keeping and getting skimmed from the inside, and also trying to float loans while PSA is taking close to two years to make their customers happy.

Not saying they're innocent in any way. Just that it was very likely a very poorly thought out business model. They also probably skimmed a lot of salary at the top before they filed for bankruptcy also...so don't mistake this for sympathy for them either.