The organizers of an infamous failed music festival will pay the Securities and Exchange Commission (SEC) more than $27 million to settle fraud charges, the agency announced Tuesday.
William McFarland, two companies he founded and two former colleagues agreed to settle charges that they wooed millions of investment dollars with false information and fabricated financial reports, according to an SEC complaint filed Tuesday.
McFarland allegedly convinced more than 100 investors to sink $27.4 million into three companies by lying about the firms’ finances, business dealings and connections to celebrities, according to the SEC.
“McFarland gained the trust of investors by falsely portraying himself as a skilled entrepreneur running a series of successful media companies. But this false picture of business success was built on fake brokerage statements and stolen investor funds,” said Melissa Hodgman, associate director of the SEC’s Enforcement Division.
One of McFarland’s companies, Fyre Festival, had promoted a disastrous music festival in the Bahamas that was scheduled to take place over two weekends in April and May 2017. Major celebrities were reportedly paid in secret to promote the festival, which was pitched as an elite gathering for social media influencers and music powerhouses.
Guests paid thousands of dollars to attend the music festival, but the event was canceled after the company failed to provide adequate food, security, housing, transportation and basic services for ticket holders.
Fyre Festival’s high-profile failure spurred numerous lawsuits against McFarland and the event’s organizers from ticket holders.
McFarland was arrested last month for several counts of criminal wire and bank fraud related to his role in Fyre Festival and Fyre Media, a platform developed for venues and event organizers to book music artists to perform at events.
The SEC alleged that McFarland had wooed investors to sink $27.4 million into the festival, Fyre Media, which the event was meant to promote, and an exclusive social club by inflating the financial success and market interest in those companies.
McFarland, his companies and top employees allegedly used falsified financial records, acquisition offers and business orders to pitch investors on funding the festival, Fyre Media and Magnises, a social club that offered members an exclusive credit card.
The SEC alleges that McFarland showed banks and investors falsified brokerage statements and booking orders for clients, touted nonexistent celebrity and business affiliations, and boasted of loans and investment offers the companies had never received.
McFarland has admitted to the charges and has agreed to repay those investors, pending his criminal sentencing. He also been banned for life from being the director or officer of any public company.
Grant Margolin, McFarland’s chief marketing officer, and Daniel Simon, a contractor to his companies, also agreed to pay the SEC penalties of $35,000 and $15,000 each for promoting false information about the the companies. Margolin is banned from being the director or officer of a public company for seven years, while Simon is banned for three years.