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50 Cent's Boxing Company Avoids a Chapter 11 K.O.

Curtis Jackson III (a/k/a "50 Cent") has been in the news for many reasons since he burst onto the music scene in 2003 and later became involved in a host of business ventures beyond the recording studio. Most recently, however, the sports side of his finances took a hit when 50 Cent's boxing promotion company, SMS Promotions LLC (SMS), filed for Chapter 11 bankruptcy (In re SMS Promotions LLC, No. 15-20901 (Bankr. D. Conn. filed May 26, 2015))

SMS, which 50 Cent launched in 2012, was supposed to be a joint venture with an established boxer, but that plan was thwarted when the boxer was incarcerated on domestic violence charges. Nonetheless, 50 Cent fought on and started SMS by himself – saying he had experience in the industry from boxing when he was younger.  Initially, SMS appeared to be doing well and signed several promising boxers.  Soon, however, two of SMS's more famous fighters, including featherweight titlist Yuriorkis Gamboa, grew unhappy with their representation and sought to escape from their contracts. This appears to have contributed to SMS's financial duress and its filing for Chapter 11 bankruptcy protection in May 2015.

However, SMS was not out for the count. In January 2016, the bankruptcy court found Gamboa's promotional contracts were still valid and the parties appeared to have later reconciled their differences. 50 Cent also rolled with the punches by settling with another SMS boxer, Ryan Martin – releasing him from his contract in exchange for 20 percent of all gross earnings for any fight the boxer participates in for the next three years as well as a percentage of his signing bonus and sponsorship deals. This reduced SMS's unsecured non-priority claims, excluding insider claims, to roughly $72,000 from around $2.3 million, giving 50 Cent more than a puncher's chance to emerge from corporate insolvency.

Getting a second wind, SMS recently asked the court to dismiss the bankruptcy case, saying it could operate with the amount of unsecured debt outstanding and that such debt did not justify the costs associated with going through bankruptcy. The U.S. Trustee in the Chapter 11 case also moved the court to dismiss SMS's filing for failure to confirm a reorganization plan within certain time limits or otherwise convert the case to a Chapter 7 bankruptcy. In May, a Connecticut bankruptcy judge granted the Trustee's motion and dismissed SMS's Chapter 11 case, allowing SMS to avoid a conversion to a Chapter 7 liquidation, which would have been a knockout blow. (In re SMS Promotions LLC, No.15-20901 (Bankr. D. Conn. May 20, 2016) (Dismissal Order)). Ding, ding, ding: SMS lives to fight another day.

© 2023 Proskauer Rose LLP. National Law Review, Volume VI, Number 175
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About this Author

L. Robert Batterman, Labor, Management, Sports, Attorney, Proskauer, Law Firm
Partner

A partner since 1974, Bob Batterman has considerable experience representing both individual employers and multi-employer groups in union relations and collective bargaining. Much of Bob’s time is spent in day-to-day contact with clients, often in “crisis” situations where a rapid resolution of union-related problems is vital.

Bob is a senior member of our nationally recognized Sports Law Group, serving as labor counsel to the National Hockey League, Major League Soccer and the National Football League. He has extensive experience in collective...

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Michael Cardozo, Commercial Litigation Attorney, Proskauer, Law Firm
Partner

Michael A. Cardozo is a Partner in Proskauer’s Litigation Department and the former Corporation Counsel for the City of New York. As the city's 77th and longest serving Corporation Counsel, he was the city’s chief legal officer, headed the city's Law Department of more than 700 lawyers, and served from 2002 through 2013 as legal counsel to Mayor Michael Bloomberg, elected officials, the city and its agencies.

Michael’s experience managing large litigations in both the private and public sectors provides him with unique insight into litigation assessments, risk management and...

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Robert L. Freeman, Technology, Media, Sports, Attorney, Proskauer, Law Firm
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Robert E. Freeman is a Partner in the Corporate Department and a member of the Sports Law Group and Technology, Media & Communications Group.

Rob began his career as an intellectual property litigator before shifting the focus of his practice to intellectual property-related transactions. Today, he helps lead a team of media, sports and entertainment attorneys representing clients such as Time Warner Cable, Discovery Communications, the WTA, the Orlando Magic, Scripps Networks, Armstrong Cable, the PAC-12, Insight Communications and CBS Sports. Rob’s work for these clients...

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Howard Ganz, Sports, Employment Attorney, Proskauer, Law Firm
Partner

Howard Ganz is co-head of the Sports Law Group and former co-Chair of the Labor & Employment Law Department.

Howard represents and counsels clients with respect to a wide variety of labor and employment matters, such as employment discrimination, sexual harassment, wrongful discharge, defamation, breach of contract, discipline, and large-scale reductions-in-force. His litigation experience has run the gamut, from single plaintiff lawsuits to major class actions, in federal and state courts in New York and elsewhere. The clients Howard has represented include the National...

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Wayne D. Katz, Finance, Sports, Attorney, Proskauer, Law Firm
Partner

Wayne D. Katz is a Partner in the Corporate Department, specializing in the sports industry.

Wayne's experience includes the representation of the National Basketball Association and National Hockey League in their various corporate matters, including team ownership transfers and team financings. Major transactions he has worked on for the leagues include the NBA’s purchase and sale of the New Orleans Hornets; the NBA's grant of expansion franchises to Toronto, Vancouver and Charlotte; the NHL's grant of expansion franchises to Nashville, Atlanta, Columbus and Minnesota; the NBA’s $...

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