The Chapter 7 Trustee for Zetta Jet alleges the glitzy private jet charter operator was in a constant state of financial distress from the start
The Trustee is seeking to claw back over $450 million from more than a dozen entities
If it sounds too good to be true, it might be too good to be true. While failed Zetta Jet marketed a champagne and caviar image, it apparently was charging Red Lobster prices and moved from financial crisis to crisis from its inception, despite portraying itself as being well-capitalized.
Its website at the time said the private jet charter operator offered “pure indulgence,” combining “Asian inspired service, European chic, and American can do.” It promised, “At Zetta Jet, no desire is too extravagant and no request too difficult.”
While customers apparently received cut-rate deals, many in the trade weren’t paid and in the end, customers who had deposits via its jet card program or had prepaid for flights that never took place found themselves out in some cases hundreds of thousands of dollars. The initial Chapter 11 filing estimated up to $100 million in unpaid bills.
According to an Adversary Complaint by the Chapter 7 Trustee filed on Sept. 13, 2019, in the U.S. Bankruptcy Court, Central District of California, Los Angeles, the Singapore and Los Angeles based charter operator was never able to achieve its targeted pricing.
The lawsuit notes the client target for Zetta Jet and its managing director Geoffrey Cassidy was wealthy executives and high-profile personalities.
The Trustee is seeking to recover over $450 million from Bombardier, which manufactured the jets the defunct company was operating, as well a jet broker involved in the sale and financing of the aircraft, an initial investor, and more than a dozen other companies.
Clawed back monies would then be used to pay off other creditors. Bombardier, it should be noted, was the largest creditor when Zetta Jet filed for Chapter 11 in September 2017 owed over $15 million.
According to the filing, “With customers consisting of ultra-high net worth individuals and celebrities who could afford a $200,000-plus price tag for a roundtrip international flight on a private luxury jet, the luxury jet market provided Cassidy with an opportunity to succeed with a new and more ambitious fraud scheme than he had attempted in the past.”
The lawsuit also outlines more of the lead-up to the merger of Cassidy’s Singapore-based entity and a U.S. Part 135 charter operator AAM, which is described as “a successful business with a fleet of nine aircraft, which were a mix of managed and leased aircraft.” It states, “AAM catered primarily to high net worth individuals, celebrities, and corporate clients in the United States and Europe.”
Cassidy, who claimed to be an UHNW himself, it alleges made promises of access to wealthy Chinese clients and “large amounts of capital in China to purchase brand new aircraft” in convincing AAM’s owners to combine their business with Zetta Jet.
The filing states while skimming money for himself, Cassidy via Zetta Jet continued to pay the debt owed on aircraft leases fearing if he fell behind he “would quickly default and lose…planes, and Cassidy’s entire scheme would come crashing down.”
An “illusion of profitability”
It says, “To help create the illusion of profitability and extend the scheme, Cassidy also caused the Debtors to sell block hours – pre-paid hours for a jet charter at a fixed price,” in other words its jet card program.
The business plan called for selling block hours at $13,800 per hour, growing at 3% year-over-year. But the company could not sell hours at a sufficient price to support their debt service obligations.
The filing states only one customer ever agreed to pay at or above $13,800 per block hour, and the average contract rate was $10,286.11 per hour, 25% less than the business plan.
It continues that on-demand charters rates also failed to match Cassidy’s business plan targets. The plan called for selling charters at $12,000 per hour, also growing at 3% year-over-year.
Records show average on-demand charter rates were going for less than $9,000 per hour and aircraft cost projections were significantly understated as well.
Adding to its problems, the filing alleges two of the first three aircraft delivered to Zetta Jet were financed at “well above market interest rates and required monthly debt service payments almost double the monthly rates assumed in Cassidy’s business plan.”
It says the business plan assumed that the company would make “significant down payments that did not occur, especially later as the Debtors fell further and further behind on their payments.”
The lawsuit notes, “When factoring in (a) the costs of ferry flights to position aircraft for use by block hour customers and (b) upgrades to Bombardier Global 5000s and 6000s provided to customers paying lower rates for lower-cost aircraft, the effective average rate fell even lower.”
It says, “Even as the Debtors sold block hours and flew charters at patently unsustainable rates, Cassidy continued to buy aircraft. Cassidy caused the Debtors to sign purchase agreements for fifteen Bombardier aircraft over ten months, from December 2015 to September 2016, for almost half a billion dollars.”
It alleges, “Cassidy knew full well, the Debtors never had any hope of paying off this financing debt,” adding, “In fact, the Debtors were insolvent almost from inception.”
“Almost never able to pay their bills on time”
The result was Zetta Jet was “almost never able to pay their bills on time. Because Cassidy had to prioritize debt service over all other obligations, to keep the scheme from collapsing, the Debtors’ overdue trade payables exploded.”
To keep “his Ponzi-like scheme, Cassidy relied on repeated cash infusions from one of his earliest and biggest backers, the wealthy businessman Li Qi. Cassidy embezzled some of this money and used some to pay down debt on the Debtors’ aircraft so that Cassidy could keep his scheme alive,” the filing says.
It adds, “Cassidy promised exorbitant returns and Li Qi got them, at least at first, on high-interest disguised financing leases and loans to the Debtors.” It also says Li Qi was able to take $55 million out of the business “to the detriment of other creditors.”
During September 2016 during a “significant cash crunch,” the complaint adds after securing new funding, “Cassidy took millions in cash from the closing and embezzled millions more for a yacht and a high-end apartment in Singapore.”
The filing states, “The allegations in this Adversary Complaint are based on information the Trustee received from the Debtors’ files and bank records, proofs of claim filed in this matter, and publicly available information, as well as reasonable inferences from those sources.”
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