Fyre Festival Founder McFarland Arrested on Fraud Charge

Fyre Festival founder Billy McFarland, organizer of a disastrous music festival in the Bahamas, was arrested on federal charges that he defrauded investors who bought a stake in the media company.

McFarland, 25, is alleged to have cheated at least two investors out of about $1.2 million by lying about the revenue and income of Fyre Media Inc., which he founded last year. He gave them phony documents claiming the company generated millions of dollars in revenue from thousands of artist bookings in a single year, when it really earned just $60,000 from about 60 performances, they said.

The scheme unraveled in April with the collapse of the Fyre Festival, which was advertised as a luxury getaway for moneyed millennials, who paid up to five figures for VIP packages. Touted as an exotic festival with the promise of supermodels, haute cuisine, and wall-to-wall excess, guests instead arrived to a lack of facilities, sparse lighting, inadequate housing, and lots of cheese sandwiches. Many attendees were stranded in an airport through the night as they tried to get off the Bahamian island of Great Exuma.

“McFarland truly put on a show, misrepresenting the financial status of his businesses in order to rake in lucrative investment deals,” acting U.S. Attorney Joon Kim said in a statement announcing the charges late Friday. “In the end, the very public failure of the Fyre Festival signaled that something just wasn’t right.”

McFarland was arrested in New York and charged with wire fraud, which carries a maximum 20-year prison sentence. He is scheduled to appear Saturday in Manhattan federal court. His lawyer couldn’t be immediately contacted.

Phone App

Fyre Media sought to build a mobile phone app that could be used to hire entertainers for clubs, concerts and parties. Later in the year, McFarland launched a subsidiary that began promoting his festival, claiming it would bring a global audience together to share a life-changing event, prosecutors said.

“McFarland promised a ‘life changing’ music festival but in actuality delivered a disaster,” Kim said.

Meanwhile, the government said, McFarland was misleading his investors. Besides providing phony documents about the company’s performance, he is alleged to have altered a stock ownership statement to make it appear that he could personally guarantee an investment. He made it indicate that he owned shares valued at more than $2.5 million when he really owned stock worth less than $1,500, prosecutors said.

After the concert’s collapse, McFarland and his company were quickly hit with at least a half-dozen lawsuits from less-than-satisfied customers and vendors. Those complaints were followed by demands from backers looking to recoup their investment — funding that in one case was directly connected to how much attendees spent on such extras as tours, booze, and “upgrades.”

Organizers borrowed as much as $7 million in a last-minute bid to fund the doomed Bahamas music showcase, according to documents reviewed by Bloomberg News. One of those loans, for $3 million, is currently the subject of a civil case after the lender, EHL Funding LLC, claimed Fyre defaulted on payments.

In a term sheet dated March 21, Fyre Media claimed to be worth $90 million. The venture capital division of Comcast Corp. chose not to invest as much as $25 million in Fyre Media after issues in due diligence, according to a person familiar with the negotiations. One such issue was that the company didn’t provide information necessary for a forensic audit and didn’t have a satisfactory billing mechanism, the person told Bloomberg in May, asking not to be identified because they weren’t authorized to speak publicly.

The case is U.S. v. McFarland, 17-mg-4988, U.S. District Court, Southern District of New York (Manhattan).

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