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Drone startup Lily filed for bankruptcy as preorder customers await their refunds

Over 61,000 people preordered a Lily drone, but none actually shipped.

Lily

The Lily drone was supposed to ship by now, but the company shut down in January before ever delivering a single one of its hyped drones to any of the over 61,000 people who preordered one.

Following a lawsuit by the San Francisco District Attorney charging the company of misleading business practices, as well as a raid by federal agents, the now defunct drone company filed for Chapter 11 bankruptcy protection Monday in Delaware.

In 2015 and 2016, Lily had amassed $34.8 million in pre-sales for its drone and received $15 million in investment from some of Silicon Valley’s most high-profile firms, including Spark Capital, SV Angel, High Line Venture Partners, Slow Ventures and Sherpa Capital.

According to its bankruptcy filing, Lily plans to issue refunds and auction off its intellectual property.

Though many pre-sale customers report having received their money back, dozens have emailed or called me in the past month complaining that they have yet to receive their refund despite repeated attempts to contact the company.

“I have tried emailing the company multiple times with no response,” complained one preorder customer last week.

“I wanted a refund and filled out the form in their auto-reply twice. However, I didn't get any response at all,” another customer told me.

Customers from outside the United States seem to be having a particularly difficult time receiving information about the refund process, reported multiple sources.

About half of Lily’s preorders came from outside the U.S. from a total of more than 80 countries, according to the bankruptcy documents.

By law, Lily was supposed to give customers an option to receive a refund if a product is delayed beyond 30 days past its promised ship date, or obtain consent for further delays.

But Lily announced multiple delays and continued to collect preorder payments without offering refunds, according to the lawsuit from the district attorney.

Lily used Stripe and Tilt for its pre-sale payment processing. According to the documents in the bankruptcy filing, Lily transferred $16.5 million to Stripe in January to refund customer preorders and $3.9 million to Tilt, totaling $20.4 million. The filing says Lily is holding $6.6 million in a separate account.

“Subject to final verification, I believe this accounts for all of the customer funds in the Debtor’s hands since May 2015,” wrote Curtis Solsvig, a financial adviser Lily hired to help with its bankruptcy, in one of the documents filed Monday.

Though this doesn’t amount to the $34.8 million Lily raked in from pre-sale orders, the filing says the company had begun processing refund requests “almost immediately after preorder sales started” in 2015.

At its peak, Lily had 69 employees on staff and at one point had “a monthly cash burn rate of $1,000,000,” according to the bankruptcy paperwork.

Lily was able to attract so many customers thanks to a highly produced video showcasing the product that went viral in 2015, but according to the lawsuit from the district attorney’s office, the footage that was supposed to be from the Lily drone in the promotional video wasn’t real. Rather, it was captured with a “GoPro mounted to a Lily prototype,” wrote Lily CEO Antoine Balaresque in an email obtained by the district attorney.

“I am worried that a lens geek could study our images up close and detect the unique GoPro lens footprint. But I am just speculating here: I don't know much about lenses but I think we should be extremely careful if we decide to lie publicly,” Balaresque wrote in another email to the producer of the video.

Recode reached out to Lily for comment, but did not immediately hear back.

Watch the promotional video of the Lily drone that was allegedly used to mislead preorder customers:


This article originally appeared on Recode.net.

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