Risk & Compliance

Fyre Festival Promoter Settles Fraud Charges

Billy McFarland agreed to disgorge the $27 million that the SEC says he raised by defrauding investors in his companies.
Matthew HellerJuly 25, 2018

The organizer of an ill-fated music festival in the Bahamas has settled charges that he defrauded investors in the Fyre Festival and two other media businesses of more than $27 million.

The U.S. Securities and Exchange Commission said William “Billy” McFarland — with the aid of two associates — inflated key financial metrics of Fyre Festival, Fyre Media, and Magnises, as part of an “extensive, multi-year offering fraud” scheme.

The fraud, the SEC said in a civil complaint, was designed to make the businesses — and McFarland himself — appear more successful than they really were, with McFarland claiming in a doctored brokerage account statement that he had personal stock holdings of more than $2.5 million when, in reality, the account held shares worth under $1,500.

The entrepreneur, who pleaded guilty in March to wire fraud in a related criminal case, allegedly used investor funds to support a lavish lifestyle including living in a Manhattan penthouse apartment, partying with celebrities, and traveling by private plane and chauffeured luxury cars.

As part of the settlement, McFarland admitted the allegations against him and agreed to disgorgement of $27.4 million. Grant Margolin, his chief marketing officer, and Daniel Simon, an independent contractor to his companies, agreed to pay fines of $35,000 and $15,000, respectively.

“McFarland gained the trust of investors by falsely portraying himself as a skilled entrepreneur running a series of successful media companies,” Melissa Hodgman, associate director of the SEC’s Enforcement Division, said in a news release. “But this false picture of business success was built on fake brokerage statements and stolen investor funds.”

The Fyre Festival in April 2017 was hyped as a “luxury concert” on a small island in the Bahamas but according to Billboard, attendees “showed up to discover the event was a sham without food, shelter, or stages.”

According to the SEC, McFarland made “numerous false and misleading statements” in investor solicitation materials about the success of Fyre Media’s online booking platform, preparations for the festival, and the number of talent bookings.

McFarland was due to be sentenced in the criminal case on Thursday but was charged last month with running a ticket-selling scam while he was out on bail.