In the Fyre Festival LLC chapter 7 bankruptcy case, pending in the US Bankruptcy Court for the Southern District of New York, the chapter 7 trustee was recently granted broad authority to conduct 2004 examinations related to a variety of transfers received by vendors of Fyre Festival totaling approximately $5.3 million.  A copy of the Court’s order is available here.

outdoor concertThe Fyre Festival was promoted as a concert experience in the Bahamas over two weekends in April and May 2017.  The festival was widely promoted on social media and yet the Debtor was failed to properly host the festival and ultimately postponed the it due to lack of preparation.  The Fyre Festival has been the subject of recent documentaries on Netflix and Hulu.

In the Trustee’s motion seeking authority to conduct such 2004 examinations, several high profile vendors and Instagram or social media influencers are identified, including IMG Models and Kendall Jenner Inc.  The Trustee seeks to determine what value Fyre Festival received in exchange for the transfers that these entities received.  The Trustee has previously obtained authority to conduct similar investigations in three other Court orders.

Under FRBP 2004, the trustee has the ability to subpoena testimony and documents on matters related to the bankruptcy case.  Such an examination is referred to as a 2004 examination and can cover a broad range of issues such as debts, transfers, financial condition, assets and liabilities, conduct, property and other issues.

In this case, the Trustee argued that because the Debtor failed to file bankruptcy schedules, did not have basic disclosures or books and recorders, the Trustee has been forced to seek financial information needed from third parties.