The Securities and Exchange Commission (SEC) announced today that Fyre Festival founder Billy McFarland — along with two companies he founded, a former senior executive, and a former contractor — agreed to settle charges arising out of “an extensive, multi-year offering fraud” that raised at least $27.4 million from over 100 investors in conjunction with the “boutique festivial” that was supposed to happen last April in the Bahamas but fell apart in chaos and cheese sandwiches. From the SEC:
The SEC’s complaint alleges that McFarland fraudulently induced investments into his companies Fyre Media, Inc., Fyre Festival LLC, and Magnises, Inc., including in connection with McFarland’s failed venture to host a “once-in-a-lifetime” music festival in the Bahamas. With substantial assistance from Grant H. Margolin, his Chief Marketing Officer, and Daniel Simon, an independent contractor to his companies, McFarland induced investors to entrust him with tens of millions of dollars by fraudulently 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. McFarland used investor funds to bankroll a lavish lifestyle including living in a Manhattan penthouse apartment, partying with celebrities, and traveling by private plane and chauffeured luxury cars.
“McFarland gained the trust of investors by falsely portraying himself as a skilled entrepreneur running a series of successful media companies. But this false picture of business success was built on fake brokerage statements and stolen investor funds,” said Melissa Hodgman, Associate Director of the SEC’s Enforcement Division.
McFarland agreed to disgorgement of $27.4 million, and the others named (Margolin, Simon, Fyre Media, and Magnises) agreed to the settlement without admitting or denying the charges.
McFarland had already pled guilty to criminal wire fraud charges and is awaiting sentencing, due in August, where he faces up to 10 years in jail. (He has also been banned for life from serving as a corporate officer or director.) He was also arrested on other fraud charges surrounding a fake ticket scheme he allegedly ran while awaiting sentencing for the initial charges (he pled not guilty to those charges). Needless to say, there is still more to come on this.