SEC charges Fyre Festival founder with fraud

The SEC announced today that it has filed fraud charges against three men behind the disastrous Fyre Festival. Billy McFarland, two companies he founded -- Fyre Media, Inc. and Magnises, Inc. -- his Chief Marketing Officer Grant Margolin and independent contractor Daniel Simon were charged with violating the anti-fraud provisions of the federal securities laws and all three men have agreed to settle the charges. The SEC said in a statement that with assistance from Margolin and Simon, "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."

The SEC noted that McFarland provided investors with a brokerage account statement that claimed he had stock holdings worth more than $2.5 million, but in reality, the account contained shares worth less than $1,500. The SEC alleges that McFarland used investor funds, of which he raised at least $27.4 million, to pay for a Manhattan penthouse apartment, private plane travel and chauffeured luxury vehicles. "McFarland gained the trust of investors by falsely portraying himself as a skilled entrepreneur running a series of successful media companies," Melissa Hodgman, associate director of the SEC's Enforcement Division, said in a statement. "But this false picture of business success was built on fake brokerage statements and stolen investor funds."

McFarland was arrested last year and charged with wire fraud. He later admitted to forging documents and lying to investors, pleading guilty to two counts of wire fraud. Earlier this month, two attendees of the festival were awarded $2.5 million each for compensatory and punitive damages.

McFarland admitted to the SEC's allegations and agreed to a permanent bar on ever serving as an officer or a director of a public company as well as the disgorgement of the $27.4 million in ill-gotten investor funds. Margolin and Simon as well as Fyre Media and Magnises agreed to the settlement without admitting to or denying the SEC's charges. Margolin will be subject to a seven-year director and officer bar and a $35,000 penalty. Simon accepted a three-year director and officer bar as well as $15,000 in disgorgements and penalties. The settlement still needs to be approved by the court.

Source: SEC



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