A federal bankruptcy judge advanced the cause of creditors attempting to recoup losses on the disastrous Fyre Festival, which was scheduled to take place in the Bahamas earlier this year but canceled at the last minute due to poor organization.
At a hearing Wednesday in U.S. Bankruptcy Court for the Southern District of New York, Judge Martin Glenn granted a request that Fyre Media Inc.’s financial documents be turned over to a trustee who will attempt to untangle the company’s financial affairs and arrive at an assessment of its assets and liabilities.
Judge Glenn signed off on the request by trustee Gregory Messer. Technically, Messer is representing the interests of Fyre Media as a court-appointed fiduciary that will attempt to wind-down the entity in an orderly fashion. On a practical level, Messer represents the interest of anyone to whom Fyre Media owes money. Although a detailed financial picture has yet to emerge as to the extent of Fyre’s debts, various lawsuits and public accounts indicate the company has outstanding obligations conservatively estimated at more than $10 million (without taking into account potential judgments in the outstanding civil lawsuits).
In July, creditors moved to force Fyre Media into an involuntary Chapter 7, which Judge Glenn approved in September, leading to Wednesday’s greenlight for accounting forensics order that require Fyre Media principal William (“Billy”) McFarland to produce documents and make himself available for questioning.
Also ordered to submit to examination and disgorgement of information is former Fyre chief revenue officer Jason Ve, and third party financial documents from the law firm of Wilson Sonsini Goodrich Rosati, which had served as Fyre’s corporate counsel, and Fyre insurance firm the Blackman Agency are likewise sought. Also fair game: paperwork from banks or “any financial institutions with accounts owned or controlled by” Fyre or its principals.
The bankruptcy proceeding will no doubt be complicated by the parallel criminal investigation, with many sought-after documents likely already in federal custody. McFarland did not have an attorney present at the hearing. Boies Schiller Flexner, LLP, which is representing him on criminal charges, had a separate court date that was also calendared for today but said it was postponed by mutual agreement.
The bankruptcy trustee can begin subpoenaing documents from McFarland and parties other than Atkins for delivery as soon as Dec. 28 . Representing Messer in court was Fred Stevens of Klestadt & Winters Jereller Southard & Stevens.
McFarland’s business partner Jeffrey Atkins (“Ja Rule”) was a party to the bankruptcy court proceedings, but received an extension and a separate hearing date on Jan. 4. One of Atkins’ attorneys, Stacey Richman, who was not in court, said civil attorney Thomas Herndon of the Sclar Law Group LLP is supervising the bankruptcy proceedings for Atkins. “We’re attempting to comply with the inquiry and have answered every lawsuit,” Richman said. “Unfortunately Mr. Atkins doesn’t have any of the records because they weren’t in his control.” Representatives for McFarland and Fyre nor could not be reached for comment a press time. No criminal charges have been filed against Atkins, who is a defendant in some of the civil cases.