A group of investors behind the doomed Fyre Festival are trying to push the company into bankruptcy, filing a petition in federal court last week to force the festival into Chapter 7 bankruptcy. By forcing the company into bankruptcy, investors might be able to claw back some of the money paid out to vendors including the artists who accepted deposits to play at this year’s festival but never performed, a source familiar with the lawsuit tells Amplify.
Investors John Nemeth, Raul Jimenez and Andrew Newman claim to have invested $530,000 into the doomed festival that was set to take place over two weekends in the Bahamas with headliners Blink-182, Major Lazer and G.O.O.D. Music. The men were promised repayment by May but never received any money from Fyre.
The doomed festival drew international headlines — many fans flocked to the island in search of a VIP paradise, only to find a half-constructed festival site and woefully inadequate preparations. Over a dozen lawsuits have been filed against festival founder Billy McFarland, who was arrested earlier this month and charged with wire fraud. McFarland faces up to 20 years in prison for allegedly lying to investors about the health of his company and using false documentation to misrepresent Fyre festival and Fyre Media’s assets.
The three investors are being represented by attorney Robert Knuts with law firm Sher Tremonte. Bankruptcy law requires a minimum of three creditors to file for Chapter 7, involuntary bankruptcy but the law firm is believed to represent at least 20 clients who invested a total of $4 million in Fyre Festival.
Forcing Fyre Festival into bankruptcy would mean the assignment of a trustee to examine the financial records of Fyre Festival and understand its relationship with Fyre Media. It could mean the release of sensitive financial data, including amounts individual artists were paid for agreeing to play the doomed festival and what percentage of the guarantees had been paid out. A bankruptcy could also reveal which senior creditors, if any, control the company and if any side deals were agreed to keep the festival afloat.
Fyre Festival was served with the summons on Monday and has 21 days to file an answer to the petition.