The founder of a failed Bahamas music festival will pay $27.4 million to settle SEC fraud charges.
William Z. “Billy” McFarland, 26, admitted in the SEC settlement to defrauding investors in the disastrous “Fyre Festival” on Tuesday, the agency announced. The SEC filed a civil suit against McFarland in the U.S. District Court for the Southern District of New York in Manhattan.
McFarland pleaded guilty to criminal charges stemming from the fraud in March and is scheduled to be sentenced next month.
McFarland fraudulently induced over 100 investors to invest more than $27.4 million in three businesses owned by McFarland by misrepresenting the financial strength and revenue of his companies, falsely claiming that he had bought cancellation insurance for the Fyre Festival and touting “exclusive, but, in fact, nonexistent” relationships with musicians, according to court documents.
Fyre Festival was touted as a luxury, “once-in-a-lifetime” music fest in the Bahamas across two weekends in the spring of 2017, offering attendees VIP accommodations with tickets starting at $1,200. Celebrities such as Kendall Jenner and Bella Hadid were used to promote the festival on social media and guests were promised exclusive transportation from Miami to the Bahamas via a private Boeing 737, high-class catering and eco-friendly villas to sleep in.
The festival was reportedly a disaster before guests got off the ground—the plane was late to Miami, creating a long wait to arrive on the island. When attendees finally made it to the festival grounds, they found tents, in lieu of villas, and cheese sandwiches in lieu of catering. Several of the headline acts at the festival had canceled their appearances. Because the festival billed itself as a “cashless event,” many of the festival goers were on the grounds without amenities nor the funds to procure them.
After leaving the festival grounds, some guests were unable to board their private flight back to Miami, stranding them in the Bahamas.
The SEC’s complaint included McFarland’s three businesses, Fyre Media, Fyre Festival and Magnises, and two alleged accomplices, Grant H. Margolin, his chief marketing officer, and Daniel Simon, an independent contractor.
McFarland allegedly inflated the success of his companies, telling investors that Magnises had $2.5 million in revenue between March 2014 and August 2015 when in reality the company had maximum revenues of about $100,000 per month. He also offered prospective investors doctored brokerage account statements purporting to show personal stock holdings of more than $2.5 million when in reality he had only $1,500 in the account.
McFarland used investor funds to fund a “lavish” lifestyle, including a Manhattan penthouse apartment, celebrity parties, private plane travel and chauffeured luxury cars, according to prosecutors.