SEC Charges Fyre Festival Founder, Others With $27.4 Million Offering Fraud
By Variety Staff
LOS ANGELES (Variety.com) – The Securities and Exchange Commission today announced that , founder of last year’s disastrous Fyre Festival, along with two companies he founded, a former senior executive and a former contractor agreed to settle charges arising from “an extensive, multi-year offering fraud” that raised at least $27.4 million from over 100 investors.
This arrives in addition to the existing charges against McFarland, who pleaded guilty to two counts wire fraud in March and was charged in June with running a fraudulent ticket-selling scheme while he was out on bail and faces new charges.
According to the announcement, the SEC’s complaint alleges that McFarland fraudulently induced investments into his companies Fyre Media, Inc., LLC, and Magnises, Inc., including in connection with McFarland’s failed venture to host the 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,” the announcement continues. “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.”
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, according to the announcement. Margolin, Simon, Fyre Media, and Magnises 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. The settlements are subject to court approval.
The heavily hyped Fyre Festival was to be a “luxury concert” — taking place on a small island in the Bahamas and featuring Blink-182, Migos and Disclosure — but collapsed on in a mess of disorganization on April 29 before it had even started. Far from the luxury accommodations and celebrity-chef-prepared meals promised by its producers — McFarland and rapper Ja Rule — concertgoers were met with flimsy tents, boxed lunches, near-total disorganization and long waits for flights to return to the mainland after airlines began refusing to fly would-be concertgoers to the overcrowded island of Exumas.
