Wealth

FBI and US attorney question JetSmarter customers

Key Points
  • JetSmarter customers say they have been interviewed by the FBI and U.S. Attorney's office in Florida about the private  jet company's business practices and communications. 
  • The scope and nature of the inquiries are unclear.
  • In a statement to CNBC from JetSmarter and its new owner, the company denied JetSmarter was under investigation, but did not say how recently it was told this. 
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Federal US officials question JetSmarter customers

Officials from the FBI and U.S. Attorney's office in Florida have been interviewing customers of JetSmarter about the private jet company's business practices and communications, according to JetSmarter customers.

The scope and nature of the inquiries are unclear.

In a statement to CNBC from JetSmarter and its new owner Vista Global, the company denied JetSmarter was under investigation, saying that it "has been informed by the United States Attorney for the Southern District of Florida that it is not a 'target' or 'subject' of an investigation." But it did not say how recently it was told this by the U.S. Attorney's office. The company said it assists the Federal Bureau of Investigation and U.S. Attorneys with information.

Officials from the FBI and the U.S. Attorney's office in the Southern District of Florida declined comment, saying it does not confirm or deny the existence of any investigation.

Legal experts say that if the FBI is not investigating JetSmarter as a company, the interviews with members could be part of an investigation into individuals or executives at the company. JetSmarter's founder and former CEO Sergey Petrossov didn't respond to requests for comment.

According to the two JetSmarter members, who both have lawsuits pending against the company, the FBI and a prosecutor from the U.S. Attorney's office in the Southern District of Florida interviewed them for more than two hours last month. The investigators asked about JetSmarter's sales practices, their communications with members, contract details, the names of salespeople and the types of passengers who flew on JetSmarter flights.

They also told the members that the interview was part of an "active investigation" that included ongoing interviews with other JetSmarter customers.

"They wanted to know all the details about our experience as customers," said one of the JetSmarter members interviewed. "They asked about how much we paid, what our contract said, and what the company told us we were buying and how they suddenly changed the terms."

The questions follow a CNBC report in January detailing JetSmarter's financial losses, lawsuits and concerns about security and drugs on JetSmarter flights. The Fort Lauderdale-based company, founded in 2012 with early minority investors that included Jay-Z and the Saudi Royal family, grew to more than 8,000 members and touted a valuation of $1.5 billion in 2016 with the promise of unlimited private jet flights.

Customers bought memberships for more than $30,000 a year that included free flights, but last year members were suddenly told they would have to start paying for flights. Customers filed more than a dozen lawsuits accusing the company of being a fraud and "unlawful bait and switch."

JetSmarter has said that its membership agreements state that terms are subject to change at any time.

JetSmarter announced this month that it was being acquired by Vista Global, the Dubai-based owner of Vista Jet and XOJET. People familiar with the deal said Vista bought JetSmarter mainly for its app technology and will use the company's technology to expand and improve its other private jet brands.

In a statement to CNBC, Vista Global said that its "integrity is an established pillar of the group's reputation and it has maintained a trusted relationship with its customers for over 15 years, which will remain solid and unchallenged."

The company added that it "carried out an extensive due diligence process and we continue to see JetSmarter as a highly attractive acquisition for the group."

CNBC reported this month that JetSmarter had reached an agreement in a class arbitration claim in Florida filed by members. The agreement, which has to be approved by the courts, creates a $3 million fund for JetSmarter members as well as free memberships and flight credits. The deal has been criticized by several attorneys representing JetSmarter members, since it allows the lawyers for plaintiffs to receive more than $3 million in fees. It also prevents members who do not actively opt out of the settlement to forfeit any future claims against the company.

An attorney representing members in the class-action arbitration said the Vista deal won't affect JetSmarter's ability to honor the agreement.

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Tailspin: A CNBC Investigation

Correction: A previous version misstated how the fees would be paid for the plaintiffs' attorneys. The deal allows the lawyers for plaintiffs to receive more than $3 million in fees. Those fees are separate from the customers' fund.