Fyre Festival: The World's Largest Festival Scam
By Sophie Kritzinger
Owner and creator of companies Fyre Media Inc and Magnises Inc, William McFarland, was charged in court for fraudulently inducing over 100 investors to invest more than $27.4 million in both businesses. It was found that he was guilty of various deceptive and fraudulent acts, including misrepresentations to investors about the financial strength of the companies, making documents inflating key financial metrics, altering stock ownership, falsely informing investors and advertising non-existent relationships with artists and talent. McFarland admitted that this was done to make his businesses appear financially strong and successful, as well as to induce investors into putting more money into the business. These approaches were successful, as he received benefits to living an extravagant lifestyle which was partly done with investor money.
Twenty-six-year-old William or “Billy” Mcfarland, is CEO and owner of Fyre Media and Magnesis. He was arrested on June 30th 2017 for wire and bank fraud and entered a guilty plea for two counts of wire fraud and money laundering on March 6 2018. He was also charged alongside his marketing directors Grant Margolin and Daniel Simon, who helped Billy create documents that inflated the financial statements of the companies without inquiring into the accuracy of the information. Fyre Media Inc was a digital application that allowed individuals to have access to special events and concerts. McFarland founded another branch which he called “Fyre festival LLC”, in which he promoted a live music festival in the Bahamas in 2017, where buyers were allowed to directly book musicians and other talents for live performances. The festival sold roughly 8000 tickets, advertising 30 famous music artists, luxury beach-front villas and housing, and gourmet foods. Many VIP tickets were sold for over £12,000. However, when attendees first arrived they immediately realised they had been scammed, as none of these promises was followed through. The festival was cancelled and organisers left the island in panic; leaving guests, investors and local workers without compensation. Their promised luxury two-weekend Bahama trip turned to chaos, without music acts and planning, and only cramped disaster relief tents to sleep in. A £100M lawsuit was filed shortly after this.
After looking into the case, it was found that he had made false financial statements updating investors, through powerpoints, false emails and offer reports which exaggerated the metrics and Fyre Festival LLC’s success, leading to investments in his businesses. A report showing 42 “accepted” offers totalling $5.6 million was sent to Margolin, and when asked if this statistic was a “typo”, he simply denied it. Offers with false values showing tens of millions of dollars revenue in ticket bookings were published to investors when only 60 tickets were paid for which amounted to $57 443. McFarland also made other misleading statements, saying that the real estate purchased in the Bahamas for the festival was worth $8M, when in fact no piece of land was ever acquired. Fake documents for bank loans, a false claim that he would get cancellation insurance for the Fyre Festival and evidence showing that he pretended that Magnesis was bought by a third party, were other offences he was charged for.
William McFarland was sentenced to six years in prison by the Manhattan federal court after pleading guilty to one count of wire fraud related to schemes involved in his companies Fyre Media Inc and Fyre Festival LLC to defraud investors and misleading ticket sales, once count of bank fraud for writing a check linked with the name and account number of an employee without consent, one count of making false statements to a federal law enforcement agent in which he denied all wire fraud. McFarland pled guilty on March 6, 2018, in front of U.S District Judge Naomi Reice Buchwald. He got sued for $7,220 by ticket holders. The court offered to pay them $281 each, a small portion of what the attendees paid to attend the failed festival. Only $1.4M has been collected by the festival’s bankruptcy trustee in order to repay customers.