Rhodium Encore LLC - Memorandum Opinion Overruling Debtors’ Omnibus Objection to Safe Proofs of Claim

Sep 16, 2026

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Memorandum opinion from the United States Bankruptcy Court for the Southern District of Texas, Houston Division, addressing Debtors’ omnibus objection to SAFE holders’ proofs of claim. The opinion reviews the Chapter 11 background for Rhodium Encore LLC and affiliates, the filing deadlines and disputed claim numbers, and the Debtors’ argument that SAFE agreements create contingent equity interests rather than claims. It further evaluates liquidation priority provisions and related comparisons to the Y Combinator form.

LanguageEnglish

CategoryLetters

FormatPDF

Pages42

Reading Time15 min

AccessFree to download

Background

SAFE agreements and disputed claims

Debtors’ liquidation-priority arguments

Comparison to the Y Combinator form

Case 24-90448 Document 1592 Filed in TXSB on 08/30/25 Page 1 of 42 United States Bankruptcy Court Southern District of Texas ENTERED August 30, 2025 Nathan Ochsner, Clerk IN THE UNITED STATED BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION IN RE: RHODIUM ENCORE LLC, et al., Debtors. §§ §§ § CASE NO: 24-90448 Jointly Administered CHAPTER 11 MEMORANDUM OPINION OVERRULING DEBTORS’OMNIBUS OBJECTION AT ECF NO. 1126 TO THE SAFE PROOFS OF CLAIM 1 I. BACKGROUND On August 24, 2024, Rhodium Encore LLC and its affiliates (hereinafter “Debtors”) filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code. (ECF No. 1) . Non-governmental Proofs of Claims had to be filed by December 31, 2024. (ECF No. 134) . Multiple entities and persons filed Proofs of Claims at Proof of Claim Nos. 11, 13, 18, 19, 20, 25, 26, 28, 32, 34, 35, 41, 42, 45, 46, 51, 83, 84, 102, 107, 111, 149, 152, 183, 197, 198, 223, 224, and 231 (hereinafter “the Disputed Claims”) between October 25, 2024, and February 14, 2025. And on May 19, 2025, the Debtors filed “Debtors’Omnibus Objection to Claims Pursuant to Bankruptcy Code Sections 502(b), Bankruptcy Rule 3007, and Local Rule 3007-1 Because SAFE Holders Do Not Hold Claims to the Disputed Claims”(hereinafter “SAFE Claims Objection”) . (ECF No. 1126) . The Debtors argued that “the Disputed Claims—totaling 1 Proofs of Claims at Proof of Claim Nos. 11, 13, 18, 19, 20, 25, 26, 28, 32, 34, 35, 41, 42, 45, 46, 51, 83, 84, 102, 107, 111, 149, 152, 183, 197, 198, 223, 224, and 231. Case 24-90448 Document 1592 Filed in TXSB on 08/30/25 Page 2 of 42 $70,820,411 .76 in asserted amount are actually contingent equity interests that are not claims.” (ECF No. 1126 at 2) . The Debtors stated that “[t]he Disputed Claims emanate from simple agreements for future equity (the ‘SAFE Agreements’) with Rhodium Enterprises, security instruments that provide for the SAFE Holders (defined below) to receive equity in Rhodium Enterprises upon the occurrence of certain events: equity financing or an initial public offering.”(Id.) The Debtors explained that “[b]etween June 2, 2021, and October 19, 2021, to raise equity capital, Rhodium Enterprises, Inc.(‘Rhodium Enterprises’) entered into multiple SAFE Agreements with certain investors (the ‘SAFE Holders’ or ‘Investors’) for a total of $87 million in aggregate.”2 (Id. at 4) . And that “[t]he SAFE Agreements specify the treatment of SAFE Holders’ contingent interests in multiple scenarios. SAFE agreements became popular vehicles for investing in startup companies starting in 2013.”(Id.) . The Debtors explained that: The SAFE Agreements provide that in the event of a change in voting control of Rhodium Enterprises or a liquidation or disposition of substantially all of Rhodium Enterprises’assets, the SAFE Agreements will “operate like standard Common Stock,” meaning that in that event, SAFE Holders will receive payment of available proceeds—after payment of all “outstanding indebtedness and creditor claims” and on par with common equity. Because the SAFE Agreements treat SAFE Holders the same as interest holders in all events, they do not possess claims. [[Id.](Id. at)[ at](Id. at) 1] The Debtors argued that “[t]he SAFE Agreements do not create claims. Instead, the SAFE Agreements provide the Holders only with contingent equity interests” and that “[e]ven if the SAFE Holders could assert 2 This Memorandum will interchangeably refer to Rhodium Enterprises, Inc. as Rhodium Enterprises, as well as REI. Case 24-90448 Document 1592 Filed in TXSB on 08/30/25 Page 3 of 42 claims related to the SAFE Agreements, those claims are subordinated to all other general unsecured creditors pursuant to 11 U. S. C. § 510(b) and statutorily on par with common equity.” (Id.) They “request that the Court disallow the Disputed Claims.”(Id.) . Pointing to §1(d) of the SAFE Agreement, the Debtors argued: The “Liquidation P

FAQs

What is the court addressing in this memorandum opinion?

The memorandum opinion addresses Debtors’ omnibus objection to SAFE holders’ proofs of claim at ECF No. 1126 and whether the disputed amounts should be treated as claims or contingent equity interests under the SAFE agreements.

How did the Debtors characterize the disputed SAFE-related amounts?

Debtors argued the disputed claims totaling $70,820,411.76 are actually contingent equity interests that do not constitute claims, and that they are subordinated under 11 U.S.C. § 510(b).

Why does liquidation priority matter to the objection?

The opinion focuses on the SAFE agreements’ liquidation priority provisions, which Debtors argued are intended to operate like common stock and deny SAFE holders any priority over certain creditors in liquidity or dissolution events.

Sep 16, 2026

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