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Jetsmarter (Part 4): A Fyre Festival in the Sky

by | Aug 10, 2018 | Aviation, Blog, Jet-sharing, Private Jet Apps

 

I first wrote about Jetsmarter in February of last year, and now just a year and a half later the company looks radically different. The VIP parties have gone quiet and the “all-you-can-eat” menu of free flights no longer exists. According to posts on Flyertalk, the membership structure changes almost on a weekly basis now.

Less than 24 hours after I posted Part 1 of this weblog series, Ronn Torossian, Chief Marketing Officer of Jetsmarter, and their lawyers launched a “scorched earth campaign” of harassment and threats of litigation in an attempt to force me to remove the content from this website. Coincidentally, just a couple days after I posted Part 2, the President of Jetsmarter, Gennady Barsky, was arrested at the Broward Financial Center, site of the company’s headquarters, and extradited to California on five counts of grand theft by embezzlement. He immediately resigned as company President.

While all of this was going on, I also received countless supportive phone calls and emails from business aviation executives, customers, aircraft owners, investment managers, and even some current and former Jetsmarter customers. The general consensus among my industry colleagues was a big thank you for saying publicly what they had all been thinking privately. Many also had questions. One question I seemed to hear often was, “But don’t you think investors with big money would be smart enough to do due diligence and see this?” My answer to that question was always, “Yes, absolutely I would!”

On THE VERGE

I also received calls from several journalists who had read the articles and wanted further input. One of the calls was from Ben Popper, business editor at THE VERGE. Ben asked if I would assist his team with an investigative article. I agreed to help as much as my time would allow. Included in that investigative process was to delve deeper into Jetsmarter’s numbers and determine the monthly cash burn for the scheduled jet shuttle services (shared flights), the company’s core product.

In March of 2017, we utilized data directly from the Jetsmarter mobile application to calculate what they were spending on a monthly basis for their scheduled jet shuttle services. It was not complicated math. Once we had calculated the total flight time for each route multiplied by the monthly frequency, all we needed to do was plug in the average hourly rate for each model aircraft they were utilizing. The wholesale rates for charter aircraft do not typically vary more than 10%, and we made sure to be conservative with all figures.

In addition, a colleague sent me a link to a document that was available to the public through the Department of Transportation’s (DOT) website. This document was Jet Edge’s “Application for Determination of Authority to Conduct Scheduled Passenger Operations as a Commuter Air Carrier” under 49 USC 41738. Included in this 169-page document were some of the exact costs Jetsmarter was paying to Jet Edge for specific routes. Among these was the HPN-OAK route (page 163) that I referenced in Part 1 and had estimated cost Jetsmarter $30-32k per flight ($60-64k per round trip). From this new information, I learned the real figure was $32.5k ($65k per round trip).

Once all of the data was extrapolated, we learned the total wholesale cost for their shuttles alone was nearly $10 million dollars per month. Of course, this did not include other overhead such as marketing, payroll and office expenses for over 300 employees, or the VIP parties they were throwing around the globe on what seemed like a weekly basis.

The numbers do not lie. It was obvious something was very wrong with this picture.

Sweet Sergey

After numerous unsuccessful attempts of intimidation and legal threats, I finally received a phone call from Jetsmarter CEO, Sergey Petrossov, himself. Our conversation was cordial and he asked if he had ever wronged me or if I had a bone to pick with him. I responded by assuring him that my opinion blog was certainly not personal; after all, I didn’t even know him. I told him the truth, which was simply that I had a very close friend who had consulted me prior to becoming a member, and through that experience I gained a lot of knowledge about his company. I decided to write about Jetsmarter because I have a unique perspective on the charter business in general, and found the situation to be so interesting and the numbers they were working with so extreme.

We spent nearly an hour on the phone, Mr. Petrossov desperately trying to convince me his business model was sound and profitable. He was even more adamant about meeting with me personally, something which I had no desire or incentive to do. Much to my surprise, he also explained how he wished to work with my company and form a partnership. I found this curious in the face of all the harassment I’d been subjected to in the weeks prior.

Still, I had no interest in working with Jetsmarter and explained to Sergey that I was fully aware of the strong-arm tactics his company employed against others who had published or voiced negative thoughts about his company. I also advised Mr. Petrossov that I would never risk my own reputation and career by publishing an article that I knew might be controversial if I wasn’t 100% certain my analysis was correct.

The conversation concluded and I assured Sergey that I had already said what I had to say and would not promote the content anymore, as long as there were no more threats.

Clear for takeoff?

Finally, after that phone call, Jetsmarter seemed to give up with their harassments as it was clear I was not going to remove the content.

After a few months, Parts 1 & 2 fell deep into search engine results and no longer received more than a few hits per day. I would still receive an occasional email or phone call from a person who read it and had a lot to say, and even one email from a disgruntled aircraft owner who had two Gulfstream IV’s in the Jetsmarter program. But overall, it seemed like my experience with Jetsmarter was over.

I was wrong.

#ReadyJetDontPassGo

A couple months ago, I received a call from Jetsmarter’s lead attorney in Boca Raton, Fred Shwartz. He informed me that I would be forced to remove the articles from my website or face significant legal judgements if I failed to respond to their accusations. However, I was not familiar with any formal accusations, only threatening emails and phone calls from Jetsmarter executives and their herd of corporate lawyers.

Since that phone call, Jetsmarter has shown an extreme sense of urgency to have Parts 1 & 2 removed from this website. They’ve even gone as far as to pose as a potential charter client in the hopes of cornering me in person. And now I’ve received yet another email from Fred Shwartz claiming a judge has signed off on an official court order to have the blogs removed from this site. According to Shwartz, I could be charged with a crime and go to jail if I fail to comply.

 

From the Theranos Playbook: How to slay a Unicorn

All of this is very shocking to me. How could someone go to jail for writing an opinion article on their own website? Is free speech dead now?

Whatever the case may be, it also made me very curious as to why all of a sudden Jetsmarter was frantic about an article that only gets a few hits per day. It didn’t make sense. Obviously, the article is not impacting their sales if nobody is reading it anymore. So what else could it be?

After pondering what their motives might be, only two possibilities seemed to make logical sense. Either the articles were making it difficult for them to obtain additional investment capital, or the executives at Jetsmarter are fearful that they are actually the ones who might be facing criminal liability. Recent developments lead me to believe it is the latter, as I simply cannot imagine anyone would give this company more capital to burn through.

Unicorn-jetsmarter-fyre-festival-theranos-investingI think these concerns have also been greatly exasperated by the recent indictments of Elizabeth Holmes of Theranos and Billy McFarland of Fyre Festival. These high-profile cases have served as a wakeup call that the US Justice System and Law Enforcement are no longer tolerating fraudulent schemes posing as legitimate private companies. Those responsible are now starting to be held accountable, as they should be.

You see, there is a difference between a bad investment and outright fraud. It’s one thing to fail, but it’s another thing to lie and steal funds from investors and new members to render services already owed to existing members.

So with this in mind, I do believe Jetsmarter is an example of a fraudulent scheme. I also believe we could ultimately see criminal indictments against the key players, such as Petrossov, Barsky, Torossian and others.

I also believe this could be the only reason Jetsmarter has not already ceased operations. It should be obvious to anyone who has been following the company that they are failing and there is absolutely no light at the end of the tunnel. However, before they close up shop, they need my articles down because they do not want this information known.

Why it Matters to Me

It’s ironic that as of right now, I’m the only one being threatened with jail. And because of that threat, I am left with a choice. On one hand, maybe it makes good sense to just remove the articles and let the chips fall as they may. Besides, I already know how their story ends and I know that that time is coming soon, regardless of whether my articles are visible or not.

On the other hand, do I allow someone else to tell me I’m not allowed to publicly voice my opinion? To that question, my answer is NO, I will not. Instead, I will double down in defense of my rights, because I have to stand up for what I know is right. I have a responsibility to do so because I know these rights we enjoy did not come easily.

Some who read this will say that Jetsmarter is a competitor or that I must have an axe to grind as this article seems very personal. And to that I’ll respond, it was certainly not personal in the beginning, but in some ways it has indeed become personal for me now. How could it not? I do not enjoy being harassed, and I especially do not appreciate another company trying to dictate content on my site. Nevertheless, it doesn’t change the truth of the matter, and the truth has always been on my side.

At the end of the day, the most important lesson I’ve learned from this experience is that we really shouldn’t expect to keep any rights that we are too fearful to exercise.

Is Jetsmarter a Ponzi Scheme? (Part 1)

Is Jetsmarter a Ponzi Scheme? (Part 1)

To put this into perspective, in our example JetSmarter loses $22,666.68 on each shuttle they run between New York and California. However, this is just a single flight, in reality they contract dozens of charter aircraft to run dedicated shuttles on a daily basis.

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