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#Youvebeenserved: Instagram Influencers Subpoenaed in Fyre Festival Bankruptcy

Last week, the trustee for Fyre Festival LLC’s bankruptcy estate received court authorization to serve subpoenas on 24 individuals and companies connected to the failed music festival, including agencies representing the social media influencers who were instrumental in promoting the event. Payments that these influencers received connected to the festival are now subject to scrutiny as the bankruptcy trustee pieces together the defunct company’s finances. Fyre Festival LLC’s bankruptcy serves as a cautionary tale to vendors in all industries, demonstrating the need to expect scrutiny when business matters they have touched go south.

The Fyre Festival, which is the subject of two documentaries out last month on Netflix and Hulu, famously ended in failure. Perhaps even more famous than the festival’s collapse was its unique promotional strategy. The festival’s advertisement relied heavily on social media posts by popular influencers, including Kendall Jenner, Bella Hadid, and Emily Ratajkowski. These and other influencers were each paid to post a simple burnt-orange tile that linked to a movie-trailer-like promotional video that promised an immersive weekend on a private Bahamian island with luxury accommodations and “the best” in food, art, and music.

Instead, the attendees were housed in leftover disaster-relief tents on an unfinished housing development and fed lousy cheese sandwiches. After the first day of the event and its large-scale logistical failures, the event’s organizers cancelled the festival. The festival’s founder, Billy McFarland, was convicted of defrauding his investors and is serving a six-year prison sentence.

Because Fyre Festival LLC failed to maintain adequate records accounting for most of the expenditures associated with the event, such as equipment rentals, catering contracts, and promotional activities, Fyre Festival LLC’s bankruptcy trustee has had to piece together the entity’s financials from information provided by third parties. Pursuant to Bankruptcy Rule 2004, any party of interest to a bankruptcy may examine any entity to shed light on anything affecting the administration of a bankruptcy estate. These examinations are generally permitted to be free-ranging, unless conducted abusively.1 To this end, the Rule authorizes attorneys to issue subpoenas to compel attendance for examination and for document production.

The order in Fyre Festival LLC’s bankruptcy illustrates how anyone affiliated with a business deal that catastrophically fails could face subpoenas and other unwelcome scrutiny. Setting aside the question about whether influencers should have some degree of responsibility for the products they promote, even those who have no culpability in a business failure could find themselves subjected to a searching inquiry. For these reasons, any company touching a commercial disaster like the Fyre Festival should retain counsel with experience responding to subpoenas and government investigations.

Visit our website to learn more about V&E’s Government Investigations & White Collar Criminal Defense practice. For more information, please contact Vinson & Elkins lawyers Jennifer Freel or Peter Thomas.

1 See, e.g., In re Enron, 281 B.R. 836, 840 (Bankr. S.D.N.Y. 2002) (“[C]ourts have recognized that Rule 2004 examinations are broad and unfettered and in the nature of fishing expeditions.”).

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.