SEC Charges Failed Fyre Festival Founder and Others with $27.4 Million Offering Fraud
Litigation Release No. 24213 / July 24, 2018
Securities and Exchange Commission v. William Z. ("Billy") McFarland et al., Civil Action No. 1:18-cv-6634 (S.D.N.Y. filed July 24, 2018)
The Securities and Exchange Commission today announced that New York entrepreneur William Z. ("Billy") 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 one hundred 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. 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. 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 today in federal court in Manhattan, charges: (i) McFarland, Fyre Media and Magnises with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; (ii) McFarland and Fyre Media with violating Sections 5(a) and 5(c) of the Securities Act; (iii) McFarland with violating Section 15(a) of the Exchange Act; and (iv) Margolin and Simon with violating Section 17(a)(3) of the Securities Act. 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 agreed to the settlement without admitting or denying the charges. Margolin has agreed to a 7-year director-and-officer bar and to pay a $35,000 civil penalty, and Simon has agreed to a 3-year director-and-officer bar and to pay over $15,000 in disgorgement and penalty. The settlements are subject to court approval.
The SEC's investigation was conducted by James Bresnicky, Benjamin Brutlag, and Sarah Lamoree, with assistance from Sarah Heaton Concannon, and was supervised by J. Lee Buck II and Melissa Hodgman. The SEC appreciates the assistance of the Federal Bureau of Investigation and the U.S. Attorney's Office for the Southern District of New York.