September 1, 2019, Southern District of New York – Last week, Gregory M. Messer, the Chapter 7 trustee for the bankruptcy estate of Debtor Fyre Festival LLC sued famous models and socialites Kendall Jenner, Bella Hadid and Emily Ratajkowski for return of payments for defrauded investors and attendees.
By way of background, William Z. McFarland (“McFarland”) and his business partner, hip-hop artist Jeffery Atkins (“Ja Rule”) started Fyre Media Inc. in early 2016 to create and promote a software application for booking entertainment. In or around late summer-2016, the two conceived of the Fyre Festival LLC. This company was established to be a unique destination concert experience in the Caribbean aimed at young millennial and featuring several top musical acts. The festival was scheduled for the two weekends in April and May 2017 in the Exumas, Bahamas. It was intended to promote Fyre Media’s booking application. The festival was advertised on Instagram, Twitter, and various other social media platforms by the numerous influencers including famous model, Kendall Jenner, Bella Hadid, and others. The ticket buyers were promised an exotic island adventure with luxury accommodations, gourmet food, the hottest musical acts, and celebrity attendees. The promotion resulted in significant ticket sales. However, when concertgoers arrived at the festival on April 27, 2017, they were met with total disorganization and chaos. None of the promised musical acts showed up or performed. The food and accommodation were a disaster. No models or celebrities, including Jenner, was present at the festival.
According to the papers filed in the Court, McFarland raised and spent over $1.6 million (so far identified) in connection with this failed festival. None of these funds were deposited into and disbursed from accounts held by Fyre Media, Fyre Festival’s parent company. Most of these funds were borrowed from individuals and institutions that were defrauded by McFarland. McFarland spent a significant amount of the funds raised from defrauded investors recklessly in continuation of his schemes. He also made false promises and admissions, which were not true.
In his complaint, the Trustee sought to recover $275,000 paid to Kendell Jenner for just making a single post to her Instagram account promoting the festival. The complaint stated that Jenner did not indicate to the public that she was paid to promote the festival. According to the Trustee, Jenner’s reference to her “GOOD Music Family” at the festival, duped many investors and attendees. The post intentionally led many members of the public to believe that Jenner’s brother in law, a famous musician and GOOD Music record label founder, Kayne West, maybe or would be performing at the festival. The Trustee alleges in his complaint that this conduct demonstrated an apparent lack of faith on Jenner’s part. Thus, the Trustee asserted that the payments made to Jenner were voidable because they were made in continuation of McFarland’s fraud, which involved duping investors, creditors and the public into investing in Fyre festival and purchasing tickets to the doomed festival.
The Trustee has so far initiated 14 clawback actions in the Fyre Festival’s bankruptcy case in the United States Bankruptcy Court for Southern District of New York. The bankruptcy case no. is 17-11883-MG. Honorable Judge Martin Glenn is pressing over the Debtor’s bankruptcy case.