Super Bowl Ticket Seller, Stung by Shortage, Files for Bankruptcy

A Super Bowl ticket seller has filed for bankruptcy to deal with upset customers who showed up to Super Bowl XVIX in Arizona only to find out that their ticket purchases had fallen through, in some cases, just hours before kick-off.

The Queens, N.Y.-based SBTickets.com issued refunds, but customers who had journeyed from as far as Brazil, Australia and Papua New Guinea are pushing for travel and lodging money for missing out on the New England Patriots’ win over the Seattle Seahawks via that jaw-dropping interception in the final seconds.

Washington state Attorney General Bob Ferguson, whose office has taken 35 complaints against the company, sued SBTickets.com in March, seeking $2,000 per violation of the state’s Consumer Protection Act.

“Because of SBTickets’ deception about its ‘guaranteed’ tickets, people spent their savings on a trip only to wind up watching the game at restaurants and hotels nearby,” Mr. Ferguson said.

In response to the complaints, SBTickets.com lawyer Mark Jay Heller said the company “originally had contemplated that tickets…would all be available” for the order.

“Regrettably, at the final hour, the tickets were not made available,” he said.

The reselling of Super Bowl tickets has been an easy, money-making strategy that paid off in previous years—but not this one. SBTickets.com is one of several brokers who got caught in a ticket shortage that pushed the list price for a single ticket to $10,288 on game day.

The cause of the shortage is still unexplained. Some blame it on optimistic ticket brokers who promised more tickets than they could deliver. Others told the Seattle Times that the NFL “deliberately manipulated the market by withholding release,” which the league denied to the newspaper.

Regardless, the shortage turned the industry of short-selling sports tickets—yes, it’s like short-selling in the stock market—on its head.

In the secondary ticket market, brokers who short tickets to sports games and other events haven’t actually bought all of tickets they’ve agreed to sell to customers. Instead, they wait (and hope) that the price will get cheaper closer to the event.

It’s usually an easy bet for the broker. If ticket prices fall, the broker can fill orders and pocket the profit; if prices increase, they can sell the tickets they have in stock at a newly higher price and refund the customer.

Super Bowl tickets usually get cheaper in the days leading up to the event. That’s when the National Football League releases tickets to players (each one can buy two), coaches and teams, who then can pass them onto sponsors and season-ticketholders. Suddenly, there are a lot more tickets to go around.

The NFL forbids players and coaches from selling tickets at a higher price. (Ex-Minnesota Vikings coach Mike Tice was fined $100,000 in 2005 for scalping his Super Bowl tickets.) But Sports Illustrated put it bluntly earlier this year: “There is little to no regulation.”

This year’s shortage became apparent in the final days before the Super Bowl. Data from SeatGeek, which tracks online resales of sporting events, showed that only 31 tickets in the 72,000-seat University of Phoenix stadium remained on Game Day. Last year, by contrast, 2,236 tickets remained on that day. In 2013, there were 2,247 tickets available.

So asking prices shot up. While the highest-priced ticket was $1,900 at face value, resold tickets for good seats were listed for more than $10,000 in the days leading up to the game. One seller asked for $68,888 for a seat in Row 18 in Section 129 on the 50-yard line.

Some ticket brokers in a bind, including StubHub, decided to buy the tickets at the higher price anyway, suffering a loss. But a day before the game, SBTickets.com customers who were expecting pick-up instructions got an email from founder Paul Jones, according to court papers:

I apologize for the change and confusion as we have never encountered such a ticket market in our years of supporting the Super Bowl. As you know, this issue has affected everyone in the market, without prejudice. As a company that thrives on its customer satisfaction we are deeply troubled to have to provide this news and are already strategizing to avoid a reoccurrence in the future.

Founded in 2007, SBTickets.com said this was the first time it didn’t have enough tickets for customers, according to Mr. Heller, whose past clients include the serial killer David Berkowitz (aka “Son of Sam”), actress Lindsay Lohan and a stuntman who tried to parachute off the Empire State Building.

SBTickets.com’s bankruptcy filing on Friday is supposed to make it easier for company officials to negotiate damages with dozens of customers who were listed in a 30-page court filing, Mr. Heller said. He declined to say whether SBTickets.com, which has taken in $1.9 million in revenue so far this year, is willing to pay more money to settle the disputes.

Mr. Ferguson, the Washington attorney general, as well as other customers who sued SBTickets.com in a proposed class-action lawsuit are also taking issue with the allegedly misleading statements on the company’s website, including that purchases of Super Bowl tickets were “100% guaranteed.”

On Monday, Mr. Ferguson told Bankruptcy Beat that the type of penalties his office is pushing for aren’t the type of debt you can get rid of using bankruptcy.

Write to Katy Stech at [email protected]. Follow her on Twitter at @KatyStech