Fyre Festival Founder Settles Charges With Securities & Exchange Commission Over $27.4M In Fraud
AP Photo/Mark Lennihan) – Billy McFarland
Billy McFarland, the promoter of the failed Fyre Festival in the Bahamas, leaves federal court after pleading guilty to wire fraud charges, Tuesday, March 6, 2018.
The sordid saga of Fyre Festival and founder Billy McFarland’s legal troubles continues with the Securities and Exchange Commission’s July 24 filing settling charges with the entrepreneur, two companies he founded, and two of his associates involving at least $27.4 million in fraud.
Fyre put the fyre in “dumpster fire” with its disaster of an excuse for a music festival in spring 2017. Co-organized by Fyre Media’s McFarland and rapper Ju Rule, the supposed luxurious “once-in-a-lifetime” two-weekend event was canceled at the last minute after festivalgoers had already started arriving in the Bahamas. Guests who paid between $1,200 to more than $100,000 for a high-end experience were greeted with leaky tents, portable toilets and cheese sandwiches.
McFarland, along with his chief marketing officer, Grant H. Margolin, independent contractor Daniel Simon, Fyre Media and Magnises were charged in the SEC’s complaint with violating the antifraud provisions of the federal security laws.
The 27-year-old entrepreneur, who admitted to the SEC’s allegations, agreed to a permanent bar from being an officer or director of any public company and disgorgement of $27.4 million. The disgorgement will be satisfied by the forfeiture order of $26 million that McFarland agreed to in March as part of a guilty plea for wire fraud charges.
As for his associates, Margolin agreed to a 7-year director-and-officer bar and a $35,000 penalty, while Simon agreed to a 3-year bar and $15,000 in disgorgement and penalty. A statement from the SEC notes that neither Margolin or Simon agreed to the settlement without admitting or denying the charges. The same goes for Fyre Media and Magnises. The settlements are subject to court approval.
The SEC complaint, which was filed in federal court in Manhattan, details the steps McFarland took to defraud tens of millions from more than 100 investors by “inflating key operational, financial metrics and successes of his companies, as well as his own personal success – including by giving investors a doctored brokerage account statement purporting to show personal stock holdings of over $2.5 million when, in reality, the account held shares worth under $1,500.”
While Fyre Festival never delivered on its promises of luxury accommodations or performances from the likes of Blink-182 or Migos, McFarland enjoyed the good life by using investor funds to pay for a Manhattan penthouse apartment and travel via private plane, according to the SEC.
McFarland’s March guilty plea for wire fraud charges was part of a deal with prosecutors that could see him serving between eight and 10 years in prison. He was arrested on new fraud charges in June, accused of scamming victims with fake tickets to events including Coachella, the Grammy Awards, Burning Man and a NBA Cleveland Cavaliers game that would include a team dinner with LeBron James. Magistrate Judge Gabriel W. Gorenstein said if McFarland is convicted for the new charges, he could face an extra two years in prison. A preliminary hearing is scheduled July 31, according to the New York Times.
Two Fyre Festival ticketbuyers who spent $13,000 for VIP packages were awarded $5 million in damages June 28, according to Vice News, which first reported the story.
A lawyer for one of the plaintiffs told Vice each plaintiff was granted $1.5 million in compensatory damages plus an additional $1 million in punitive damages including accommodations as well as mental anguish.