In 2017, over 80 investors were eagerly looking forward to the Fyre Festival, a music festival spanning two weekends in the Bahamas. The outlook for the festival’s investors was great: The hotly-anticipated event got widespread media attention and its tickets sold like hotcakes. But the investors were unaware of one crucial detail: The Fyre Festival was a poorly-conceived scam thought up by its founder, William McFarland, to defraud investors of over $26 million.
Recently, McFarland pled guilty to two counts of wire fraud connected to his plans to defraud investors and a ticket vendor. He has admitted to tendering fake documents to induce people to invest in his company, Fyre Media and its subsidiary, Fyre Festival LLC. The white-collar criminal now faces federal charges—a somber ending to the long, strange saga of the Fyre Festival.
A fraudulent festival
As the founder and chief financial officer of Fyre Media, McFarland would use deceptive statements and false documents to persuade deep-pocketed entrepreneurs to invest in his company. To make Fyre Media appear more profitable than it actually was, he lied about its revenue and manipulated its financial statements. Investors say that he claimed Fyre Media had earned millions of dollars within only one year; in reality, it had made under $60,000.
In addition, he established Fyre Festival LLC, a subsidiary that would hold a music festival in the Bahamas that would feature popular musicians. McFarland continued to misrepresent financial aspects of the festival to its investors. Ultimately, it was canceled, and the nonexistent music festival was mocked in the mainstream press and social media. Overall, the 80 investors’ losses topped $26 million.
Wire fraud and the law
In addition to reimbursing his investors, the deceptive CFO now faces serious criminal penalties for wire fraud. He will soon be sentenced by a New York Federal Court. Mr. McFarland and the Fyre Festival provide a cautionary tale to startup-owners. White-collar crime carries serious consequences in the Untied States, and Texas is no exception. The criminal justice system does not look kindly on white-collar criminals, whether they are CFOs or entry-level employees. Wire fraud, for example, carries a maximum sentence of 20 years in prison. Anyone who faces charges of white-collar crime is advised to consider their legal options.