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Failed Fyre Festival leads to fraud arrest and civil lawsuits

Billy McFarland, founder of the failed Fyre Festival, says he overestimated his ability to pull together a successful first-time event. Billed as “more than just a music festival,” Fyre Festival was supposed to be an upscale destination experience. Instead, the island concert was a lackluster debacle on many levels and McFarland is now facing federal criminal charges and multiple civil lawsuits on behalf of aggrieved attendees.

McFarland was arrested June 30 and charged with fraud. Not only did he overpromise on musical acts and celebrities that failed to materialize, he allegedly committed wire fraud and perhaps securities fraud in the process. The federal indictment asserts the 25-year-old promoter falsified documents and mischaracterized stock holdings to swindle investors and to convince individuals to pay up to $12,000 each to attend.

Least festive festival ever?

The setting for Fyre Festival was a private island in the Bahamas. It was supposed to be a sort of star-studded Woodstock, promising major musical acts and the chance to rub shoulders with Hollywood elites. It was supposed to be posh and exclusive.

The reality was a spectacular disaster. No headline artists. No A-list celebs. The promised celebrity chef food was a box lunch cheese sandwich. Luxury accommodations turned out to be disaster relief tents. Thefts. Lost baggage. And general chaos. In the social media era, Fyre Festival went up in flames, mocked and ridiculed mercilessly. 

Fraud or just overhype?

Festival co-founder Jeffrey Atkins (aka rapper Ja Rule) tweeted out his apologies after Fyre Fest imploded, insisting it was “NOT A SCAM” and adding that it is “NOT MY FAULT.” Atkins is not (to date) under indictment, although he has been named as a co-defendant in civil lawsuits.

In the aftermath, McFarland likewise downplayed assertions that they set out to defraud anyone. He said he and his organizers were merely “naïve” in thinking that they had the experience to make the event happen, and talked optimistically of a better event “next year.”

However, the U.S. Attorney’s Office in Manhattan does not believe that McFarland was merely in over his head. Prosecutors contend he knowingly misled investors and attendees:

  • Characterizing Fyre Media as having booked “thousands” of artists when the reality was only 60 acts
  • Telling investors the company had secured “millions” of dollars in revenue from artist bookings, compared to actual receipts of about $60,000
  • Doctoring a brokerage statement to convince one investor that he owned $2.5 million worth of stocks that were in fact worth under $1,500

The wire fraud indictment concludes that at least two investors put up funding of $1.2 million for Fyre Festival based on the misrepresentations of revenue and income.

Fraud charges require an element of criminal intent. Federal prosecutors must prove that McFarland intentionally deceived investors and those who paid thousands of dollars for an “amazing” experience. His defense attorneys have their work cut out for them. A mea culpa defense of negligence and incompetence would play right into the civil lawsuits and seal the fate of McFarland’s Fyre Media.

Source: www.justice.gov

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