Great frauds in history: Billy McFarland – the man behind the Fyre Festival
Around 5,000 people paid Billy McFarland up to $100,000 each to attend the lavish Fyre Festival on a Caribbean island. They arrived to find accommodation consisted of little more than some emergency tents.
Billy McFarland was born in New York City in 1991. At the age of 13 he founded an online company selling web space to mainly adult websites. By the time he finished high school he claimed to have founded two other companies. He briefly attended Bucknell University before dropping out to raise venture-capital funding to develop a social-media site where friends could share music and videos. He then set up Magnises, an invitation-only club based on a charge card, offering invitations to exclusive events. Despite receiving funding from energy tycoon Aubrey McClendon, McFarland became bored with the venture and founded Fyre Media instead.
What was the scam?
Fyre Media was based on a website that would make it easier to book artists and celebrities for events. The firm made less than $60,000 from 100 bookings between July 2016 and April 2017, so McFarland presented investors with false financial reports that portrayed the company making millions of dollars from thousands of bookings. He also forged brokerage statements to claim that he had $2.5m-worth of Facebook stock that he could use to personally guarantee some of the larger investments.
What happened next?
To publicise the website, McFarland planned the Fyre Festival, a lavish event on an island in the Caribbean that was to run in April and May 2017. A clever social-media campaign, involving various celebrities and supermodels, lured around 5,000 people, paying between $1,200 and $100,000 each, to buy in. Instead of the promised luxury experience, revellers arrived to find accommodation consisted of little more than some emergency tents. The subsequent media storm led to an investigation by the FBI and McFarland was charged with fraud in June 2017. He was sentenced to six years in jail.
Lessons for investors
The failure of the Frye Festival generated the most publicity, but the biggest losers were the investors who had put a total of $27.4m into the company, including fashion tycoon Carola Jain, who loaned McFarland $4m. Many start-ups fail, but there were several red flags here, including the fact that many of the artists who had supposedly signed up to the website were already represented by other agencies. Another investor pulled out after realising that the “private island” where the festival was due to take place was actually part of an undeveloped resort.