Is Lily Robotics the Theranos of the Drone World? by Jeremy Quittner @FortuneMagazine January 17, 2017, 12:54 PM EST E-mail Tweet Facebook Linkedin Share icons Troubles for drone manufacturer Lily Robotics continue to mount. On the same day that the company announced it would be shutting down due to lack of funds, the District Attorney of San Francisco hit Lily with a lawsuit, alleging the three-year-old startup had made false and misleading statements about its selfie-taking camera drone. Filed Jan. 12, the lawsuit claims Lily produced a promotional video that included footage from competing devices instead of its own technology; Lily drone prototypes were allegedly fitted with cameras from GoPro and DJI Inspire. The company’s founders — former UC Berkeley engineering students Antoine Balaresque and Henry Bradlow — were present at the video filming, according to the suit. The video was the ninth most-watched ad on YouTube when it was released in May 2015, and was rebroadcast by news outlets, the suit alleges. The lawsuit also claims Lily violated the Federal Trade Commission’s (FTC) Mail Order Rule, calling the company’s actions in that regard “willful, intentional and corrupt.” The FTC’s rule requires companies that take pre-orders to get customer consent for delays, and to offer an option to cancel the order with a full refund, if the shipment is delayed beyond 30 days. Throughout 2016, as Lily pushed back its shipping date, it continued to raise prices on pre-orders. The drone was sold from $499 to $899, depending on the pre-order date. In addition to customer refunds, the lawsuit is seeking penalties of $2,500 for each violation of four subsections of the Business and Professions Code. On the low end, that would equal $150 million in damages. The Lily drone, which was met with much fanfare when it was announced in 2014 and given an innovation award at last year’s Consumer Electronics Show, never made it to market despite a reported $34 million worth of pre-orders. In late 2015, Lily pulled in $14 million in funding from 14 investors including Spark Capital and Winklevoss Capital. At the time, it announced it would move its February 2016 ship date to summer 2016. More delays pushed the date to late 2016 and early 2017. On Jan. 12, the company announced it lacked the funding to manufacture and ship its drone and would therefore be shutting down. Related: Drone Startup Abruptly Shuts Down Despite $34 Million in Pre-Orders The Lily drone was billed as a high-performance, selfie-taking camera that customers could simply fling into the air. It would stay aloft, using a GPS to track user movements and take pictures, with no need for a pilot at the controls down below. Representatives from Lily were not immediately available to comment. In an email sent to customers last week, the company promised full refunds for pre-orders.