Not really related to corporate ethics and compliance, but too good to ignore: the SEC just charged the three knuckleheads responsible for the Fyre Festival Fiasco of 2017 with bamboozling their investors out of $24.7 million.
If you are fortunate enough to have forgotten about the Fyre Festival, let me recap. In 2016, wannabe New York socialite William “Billy” McFarland, dreamed up the Fyre Festival — a vision of wealth, opulence, famous people, and music, all supposedly happening at a two-week music festival in the Bahamas.
Pretty people would dance on white sandy beaches. They would do other things after dark in luxury villas. They would enjoy an “immersive music experience” after flying in from Miami on a private, custom-designed Boeing 737 jet. It would be beautiful, and glorious, and all documented on Instagram for we peons back at the office.
And it was, of course, a complete fiction.
The reality was closer to Lifestyles of the Rich and Famous meeting the fall of Saigon. There were no villas, no music, no luxury, no supermodels. There was nothing but chaos, which you can see for yourself on Twitter under #FyreFestival, or wait for the documentary series apparently in development for Hulu. Picture hundreds of rich kids stranded on the beach, enduring conditions more like what one might encounter at LaGuardia Airport — you know, total privation.
Anyway, on Tuesday afternoon the SEC finally got around to charging McFarland, 26, and two of his buddies: Grant Margolin, 25, who served as head of marketing for the Fyre Festival; and Daniel Simon, 23, who attended high school with McFarland and was some hanger-on to the business working as a contractor.
According to the SEC complaint, McFarland & Co. flimflammed investors all sorts of ways. They falsified financial data; they made false claims of affiliation with talent; they promised to get event cancellation insurance, and then never did. They even cooked up a false brokerage statement to con investors into believing McFarland had sufficient collateral to securitize the investments. Spoiler alert: he did not.
My favorite line from the SEC complaint details “the December 2016 PowerPoint,” created by Margolin to woo investors. In it, one slide said the business (formally known as Fyre Media) was “on track to achieve $160M [in] completed bookings by Q4 2017” (emphasis in the original, naturally). Fyre Media’s chief revenue officer saw the number and then asked where it came from, since it “was inconsistent with the CRO’s understanding of the correct figure,” as the SEC so diplomatically put it.
You can read the rest of their scheme yourself, which unfolds like a Coen Brothers film set loose on Wall Street. But on a serious note, these three boobs managed to swindle more than $24 million from 102 investors. Financial fraud is not funny, even when it happens to trust fund babies and airheads. Kudos to the SEC for holding them accountable.
McFarland has admitted the SEC’s allegations against him and agreed to a permanent officer-and-director bar, which isn’t nearly long enough considering the preposterous scam he foisted on so many people. He also faces a possible prison term in related criminal proceedings.
Margolin and Simon also agreed to settle, with civil penalties and shorter officer-and-director bars.