Multi-year offering fraud raised at least $27.4 million from over 100 investors
The Fyre Festival was billed as a super luxe musical festival to be held in the Exumas (part of the Bahamas) populated by models and the super cool. Celebrities like Bella Hadid, Kendall Jenner, and Hailey Baldwin helped to promote the event on social media providing a luster of exclusivity. Day tickets were sold for a whopping $1500 and VIP packages topped $10,000. Unfortunately, for people who purchased tickets to the event it was little more than a bad joke of a gathering. Social media went ballistic with the disaster sharing photos of Fyre to the point it has become a meme for fraud. In fact, there is a Twitter account called Fyre Festival Fraud (@FyreFraud) dedicated to the pathetic debacle.
#FyreFestival update, photos from the ground! pic.twitter.com/Z7fn9cKaz3
— FyreFestivalFraud (@FyreFraud) April 27, 2017
So Fyre Fest is a complete disaster. Mass chaos. No organization. No one knows where to go. There are no villas, just a disaster tent city. pic.twitter.com/1lSWtnk7cA
— William Needham Finley IV (@WNFIV) April 27, 2017
Organizer William Z “Billy” McFarland has been lambasted in the press for the event and was sued in 2017 in a class action. Earlier this year, McFarland pleaded guilty to several charges. There is plenty more to this path of deception.
Today, the Securities and Exchange Commission (SEC) has announced that McFarland, 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.
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.
The SEC states that 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. In the real world thought, the account held shares worth under $1,500. The SEC adds that McFarland used investor funds to bankroll a posh lifestyle including living in a Manhattan penthouse apartment, partying with celebrities, and traveling by private plane and chauffeured luxury cars.
Melissa Hodgman, Associate Director of the SEC’s Enforcement Division, says it was all “built on fake brokerage statements and stolen investor funds.”
The SEC’s complaint, which was filed in federal court in Manhattan, charges McFarland, Margolin, Simon, Fyre Media, and Magnises with violating the antifraud provisions of the federal securities laws. McFarland has admitted the SEC’s allegations against him, agreed to a permanent officer-and-director bar, and agreed to disgorgement of $27.4 million, to be deemed satisfied by the forfeiture order entered in McFarland’s sentencing in a related criminal case.
Margolin, Simon, Fyre Media, and Magnises have reportedly agreed to the settlement without admitting or denying the charges.
Margolin has agreed to a 7-year director-and-officer bar and must pay a $35,000 penalty, and Simon has agreed to a 3-year director-and-officer bar and must pay over $15,000 in disgorgement and penalty.
Hopefully, the saga of Billy McFarland ends here.
Quick Answer: models were paid to sell you a product that was never real. https://t.co/pa7R9Ly0zc
— FyreFestivalFraud (@FyreFraud) March 29, 2017