
SEC Charges Failed Fyre Festival Founder and Others with $27.4M Offering Fraud - moritzplassnig
https://www.sec.gov/news/press-release/2018-141
======
tlrobinson
This reminded me of Anna Delvey, the fake socialite who scammed a bunch of
people in NYC: [https://www.vanityfair.com/news/2018/04/my-misadventure-
with...](https://www.vanityfair.com/news/2018/04/my-misadventure-with-the-
magician-of-manhattan)

It turns out she may have squatted in Billy McFarland's company's office for
months, refusing to leave: [https://www.thecut.com/2018/07/anna-delvey-scams-
fyre-festiv...](https://www.thecut.com/2018/07/anna-delvey-scams-fyre-
festival-billy-mcfarland.html)

I wonder if these people initially set out to straight up scam people, or if
they got caught up in the "fake it till you make it" / Instagram culture, and
just kept digging themselves deeper.

~~~
gowld
What's the difference? When the mob converts to a legit garbage haulit
company, we're they just "faing it till they made it"? Obviously even an
amoral criminal would prefer to make money legally, _all else being equal_

~~~
jdietrich
The latter scenario is actionable. We can't do much about people who are just
inherently dishonest, but we can do something about a culture that teaches
people that dishonesty is a normal and healthy part of growing a business.

------
Animats
McFarland is in prison. The "related criminal charges" put him in the Federal
pen.[1]

    
    
        Federal Bureau of Prisons Inmate Locator
        WILLIAM Z MCFARLAND
        Register Number: 91186-054
        Age:  	26
        Race: 	White
        Sex: 	Male
        Located at: Brooklyn MDC
        Release Date: UNKNOWN
    

While out on bail awaiting sentencing, he tried another fraud last month,
selling fake tickets to real festivals.[2] That got his bail revoked and a
quick trip to the Brooklyn Metropolitan Detention Center.

[1] [https://www.bop.gov/inmateloc/](https://www.bop.gov/inmateloc/) [2]
[https://variety.com/2018/biz/news/fyre-festival-founder-
bill...](https://variety.com/2018/biz/news/fyre-festival-founder-billy-
mcfarland-arrested-for-new-ticket-selling-scam-1202844282/)

~~~
selestify
I don't understand why you would keep doing the very thing people are
investigating you for.

~~~
gowld
Do what you know.

~~~
EliRivers
He was just following his passion :)

------
jumpman500
> 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

Man. This whole event sounds like the perfect setup for a comedy. I really
hope it's in the works.

[https://www.eonline.com/news/847110/fyre-festival-the-
movie-...](https://www.eonline.com/news/847110/fyre-festival-the-movie-seth-
rogen-and-the-lonely-island-say-they-planned-film-about-music-festival-gone-
wrong)

~~~
ng12
That's my favorite bit. I guess a passing knowledge of Chrome developer tools
is all you need to fraudulently raise $27m.

~~~
stryk
I'm actually surprised there haven't been more cases of VC folks being
defrauded (Theranos aside). The way those people like to just throw hundreds
of thousands of dollars or more at newly formed, wholly unproven, companies is
astounding.

~~~
chrsstrm
How do you know this doesn't happen all the time? Athletes and celebs get
fleeced every single day but no one ever hears about it. No one in that
position wants anyone to know they got taken. I can't imagine a VC would be
any different. If you were a VC would you want anyone to know that the
$X00,000 you put into an "early stage company" was actually spent on hookers
and blow? Everyone knows there are shitty people out there but _you_ were the
one who gave them money. There is certainly a threshold where this turns into
fraud and the authorities are called, but if you've lost a rounding error
amount of money why would you risk the reputation hit over punishing a con
artist? You blacklist the fraudster, sweep it under the rug, then hope your
next investment covers the loss. What is surprising to me is that this is
happening right out in the open all the time and no one is noticing, mainly
because the fraudsters have CS degrees and know not to get too greedy or seem
too incompetent. Everyone here knows you can get industry cred and a very nice
salary for a couple years with nothing more than a clever slide deck.

~~~
selestify
What's the reputation hit?

~~~
gowld
If you are supposedly a brilliant investor and some idiot kid stole $200K from
you, you wouldn't tell anyone because it would ruin your reputation as a
genius.

------
JumpCrisscross
Billy McFarland's Wikipedia page [1] is an entertaining read.

My favorite part of his story: "federal prosecutors in Manhattan said that
from late 2017 to about March — months after Mr. McFarland had been charged
["with wire fraud in relation to Fyre and Fyre Festival"] — he ran a company
that sold fraudulent tickets to exclusive events like the Met Gala, Burning
Man and Coachella. In one case, the authorities said, two customers flew from
Florida to New York for the Grammy Awards, only to be turned away at the door"
[2].

Not sure how someone becomes this irredeemable at just twenty-seven year old.

[1]
[https://en.wikipedia.org/wiki/Billy_McFarland_(entrepreneur)...](https://en.wikipedia.org/wiki/Billy_McFarland_\(entrepreneur\)#cite_note-27)

[2][https://www.nytimes.com/2018/06/12/arts/fyre-festival-
organi...](https://www.nytimes.com/2018/06/12/arts/fyre-festival-organizer-
fraud.html)

~~~
schaefer
Another point of view: at no time is any human being irredeemable.

~~~
ljm
As soon as you discard someone as such, you're just basically just consigning
them to do even more of the same. Why even bother trying change if you are
actively expected to not do any better?

It's refreshing to see a viewpoint that doesn't jump straight to throwing bad
guys to the wolves.

~~~
stephengillie
Auto-monkeysphering - involuntarily deciding you won't need to think about
that person again in the future, reducing the cognitive load of humans to need
to care about by one, forever.

------
tunesmith
"Let's just do it and be legends, man." This sentence has made it into the
vernacular of my group of friends, whenever we start considering something
that isn't at all thought out yet.

~~~
ohitsdom
Definitely a go-to phrase for me when tackling a hard challenge. Followed up
with "except let's actually do it, not like that dumpster fire of a festival."

------
sschueller
What about the people who promoted it without disclosing that they were paid
to promote it? Certein Instagram celebrities come to mind.

~~~
nerdponx
If they weren't in on the fraud, I'm not sure they should be held responsible.

~~~
JumpCrisscross
> _If they weren 't in on the fraud, I'm not sure they should be held
> responsible_

They shouldn't be held _criminally_ responsible. Civilly, however? Fair game.
If you make money selling a product, you have a duty to check it isn't a scam.

~~~
nerdponx
Isn't this a big issue with Amazon right now? What does the law say about it
in that case?

------
ergothus
> 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 100 investors.

So the issue is already settled, and the 24.7M is just the fraud, not the
penalty.

> 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
> must pay a $35,000 penalty, and Simon has agreed to a 3-year director-and-
> officer bar and must pay over $15,000 in disgorgement and penalty. The
> settlements are subject to court approval.

I don't know what the forfeiture case involved, but this looks like a slap on
the wrist given the numbers involved.

EDIT: > McFARLAND, 26, of New York, New York, pled guilty to two counts of
wire fraud, each of which carries a maximum sentence of 20 years in prison,
and consented to a forfeiture order in the amount of $26,040,099.48.

from: [https://www.justice.gov/usao-sdny/pr/william-mcfarland-
plead...](https://www.justice.gov/usao-sdny/pr/william-mcfarland-pleads-
guilty-manhattan-federal-court-defrauding-investors-and-ticket)

That forfeiture does NOT look like a slap on the wrist

~~~
beager
I mean, that forfeiture looks like "return most of the money you stole from
the bank" with no punitive damages other than an officer-and-director bar, so
does appear to be a slap on the wrist, unless he also serves time for the wire
fraud.

~~~
ergothus
You are correct - I was focused on the "did he get to profit from this despite
getting caught" because I was worried about the positive incentive to be a
fraud. However, lack of a positive when caught is NOT the same as a negative,
so yeah, still a slap on the wrist, relatively speaking.

~~~
freeone3000
This is just the SEC charges. They mention a concurrent criminal case - this
is where the actual penalties are going to be.

------
_bxg1
Seems like a pretty generous settlement, doesn't it? He just had to give back
the money. The "permanent officer-and-director bar" is there to prevent him
from continuing to defraud people, but he really didn't have to pay an actual
fine at all.

~~~
rainbowmverse
It's the difference between restorative justice and retributive justice. This
is the former, and seems better for the public good.

I want them to know they'll lose everything they gained if they're caught. I
don't want them coming up with ever more clever and socially destructive ways
to avoid being caught because of harsh penalties.

~~~
_bxg1
Seems like the opposite to me. If there's no penalty to getting caught, why
not keep trying? I'm not sure what "ever more clever and socially destructive
ways to avoid being caught" you could be referring to

------
narrator
This makes me think of the Chinese social credit score system. What if it
actually works and detects these kinds of people and locks them out of the
system before they can cause a lot of damage?

~~~
justinclift
Probably depends on the things that get measured, how easy it is to fake/rort
those metrics, and how resistent to corruption the system is.

To me it sounds like a case of "interesting in theory, but probably difficult
to make work in practise" things. Corruption would undermine the whole thing,
if that's not the actual behind-the-scenes intent from the start.

------
efficax
failed fyre festival founder, that's quite a tongue twister.

