Fyre Festival $100 Million Lawsuit Targets Investors Behind the Scenes
Before the now-infamous Fyre Festival collapsed a few weeks back, the company behind it—maker of a mobile phone app you can use to hire entertainers for your club, concert, or party—said it was worth $90 million, according to a document obtained by Bloomberg News.
Fyre Media Inc. faces a half-dozen lawsuits from less-than-satisfied customers over the disastrous music event in the Bahamas. Now that the fallout is beginning to land in court, details are coming out about the company behind it.
A term sheet dated March 21 described the particulars of a proposed $10.5 million investment in Fyre by Comcast Ventures, the investment arm of media giant Comcast Corp. In exchange for the money, Comcast was to get a 10 percent stake, according to the document. An additional $4.5 million from new and existing investors would flow into the tech startup, too, the term sheet stated. But the deal fell through. Though Comcast had considered investing as much as $25 million, it eventually backed away entirely during the due diligence process, according to a person with knowledge of it who requested anonymity. A Comcast spokesperson declined to comment on the term sheet.
The Fyre Festival was supposed to be a luxury getaway for moneyed millennials, who paid up to five figures for VIP packages. Touted as an exotic festival with the promise of supermodels, haute cuisine, and wall-to-wall excess, guests instead arrived to a lack of facilities, sparse lighting, inadequate housing, and lots of cheese sandwiches. In the litigation that’s followed, attendees accused promoters of not keeping their promises. Many were stranded in an airport through the night as they tried to get off the Bahamian island of Great Exuma, and the availability of refunds was unclear due to conflicting information from the promoters.
As far as the investors were concerned, Comcast dodged a bullet. It dropped out just days before the massive, ultimately doomed attempt at branding. But for those who did invest in Fyre Media, things got a lot more complicated this week.
On Sunday, unidentified investors in Fyre Media were added as defendants to a proposed class action alleging fraud and breach of contract. Filed on behalf of a single concertgoer by Hollywood law firm Geragos & Geragos, the suit (claiming $100 million in damages) doesn’t identify the investors by name, referring to them as Doe Investors 1 though 15.
The firm, which contends it will have more than a 1,000 additional plaintiffs before long, said it remains unclear whether the investors were also victims of an alleged fraud.
“In the weeks leading up to the festival, when the company already knew the event was doomed for failure, Fyre Media Inc., which was minimally under-capitalized with [initial] investors, was floating a completely inflated and shocking valuation of Fyre Media Inc. between $90 million and $105 million to additional” investors, the lawyers said in court papers.
While the complaint didn’t name any investors, the copy of the term sheet names Corazon Capital Ltd. as among the investors in Fyre Media. An employee of Fyre Media, who spoke only on condition of anonymity, said Sam Yagan, who runs Corazon, visited the office last fall. Billy McFarland, Fyre’s founder, had told employees at the time that Yagan was an investor, the person said.
Yagan committed to a “small seed investment” in Fyre’s app after meeting with McFarland last May, Yagan’s spokesman said. “As passive investors, we had no involvement in operating the business or the conception or execution of the Fyre Festival,” said the spokesman. “We had no interest in their plans to produce a festival and unequivocally disavow the handling of the situation in the strongest possible terms.” A second firm, Pensco Trust Co., was also listed on the term sheet as a seed investor. Carola Jain, also named on the document, was described by the person as a friend of Fyre Media who once sponsored a party for the company. Pensco and Jain didn’t return requests seeking comment on the term sheet.
McFarland and his partner, musician Ja Rule—both named as defendants with Fyre Media—didn’t respond to requests for comment on the term sheet or the amended complaint. Corazon, Yagan, Pensco, and Jain aren’t named as parties to the litigation or accused of any wrongdoing.
“Clearly, the $90-$105 million valuation placed on Fyre Media by its founders was completely untethered to any financial reality,” Geragos firm lawyers wrote in the filing in Los Angeles federal court. “Yet, the ability of Fyre Media to float any substantial valuation at all was based on the continued cash flow it was receiving, in the weeks and days leading to the festival, from attendees who were the unwitting pawns and ultimately victims.”