Fyre Media

Fyre Media was founded in 2016 by Billy McFarland and rapper Ja Rule to develop a celebrity booking app.² The company promoted a luxury music festival in the Bahamas that collapsed in April 2017 when attendees arrived to find inadequate accommodations and no musical acts.²⁸ McFarland pleaded guilty to fraud charges in 2018 and was sentenced to six years in prison, while Fyre Media and Fyre Festival LLC entered bankruptcy proceedings.²⁶¹⁸

Timeline

Money raised

Fyre Media raised at least $27.4 million from over 100 investors, according to the SEC.¹³ The company claimed a valuation of $90 million in a term sheet from Comcast Ventures for a $10.5 million investment that was never finalized.¹⁴ The government said Fyre Media booked only $57,443 in revenue between May 2016 and April 2017.² Fyre Festival paid more than $5.2 million to influencers and prospective performers, including $250,000 to Kendall Jenner for a single Instagram post.² McFarland was ordered to pay more than $26 million in restitution to investors and customers.² A class-action settlement in 2021 provided $2 million to be distributed among 277 ticket holders, each receiving $7,220.¹⁸

Investors named in the sources: Comcast Ventures²¹⁴, EHL Funding²¹⁵, Ja Rule².

What happened

Fyre Media was founded in 2016 by Billy McFarland and rapper Ja Rule to create a celebrity booking app.² The company planned to launch Fyre Festival in the Bahamas as a promotional event for the app.² McFarland began soliciting investors in late 2016, making misrepresentations about the company's value and financial health.² He claimed Fyre Media was worth at least $90 million and that he had sold his previous company Magnises for up to $40 million, which was false.² McFarland told investors they would have a right to a payout if the festival was cancelled, but he had not secured cancellation insurance.²

The festival was marketed through a coordinated influencer campaign, with models and celebrities posting an orange tile on Instagram.²⁵ Fyre Media paid influencers, including $250,000 to Kendall Jenner for one Instagram post.² The company claimed the campaign reached 300 million people in 24 hours through 400 influencers.⁵ Fyre Festival sold tickets ranging from $500 to $1,500, with VIP packages at $12,000.⁷⁸ Approximately 5,000 tickets were sold.²⁷

Despite warnings from vendors that planning would take over a year, McFarland pushed to hold the event within months.² A potential $20 million investment from Comcast Ventures fell through after due diligence.² The company had only $57,443 in revenue between May 2016 and April 2017, according to the government.² Attendees arrived on April 27, 2017, to find disorganization, limited tents, wet mattresses, and inadequate food.²⁸ Many musical acts, including Pusha T, Tyga, Migos, and Blink-182, dropped out before the event.²

Attendees began leaving en masse, and images of the chaos spread on social media.² The festival was cancelled, and attendees were stranded at the airport with no food or water.⁸ On May 11, 2017, McFarland told employees on a conference call that payroll would stop and they would not be fired.¹⁴¹⁵ Most employees quit over the following weekend and Monday.¹⁵ Fyre Festival LLC was placed in bankruptcy in August 2017.⁶

McFarland pleaded guilty in 2018 to two counts of wire fraud and was sentenced to six years in prison.²¹⁸ He was ordered to pay more than $26 million in restitution.² The SEC charged McFarland, Fyre Media, Magnises, Grant Margolin, and Daniel Simon with a multi-year offering fraud that raised at least $27.4 million.¹³ McFarland settled with the SEC, agreeing to a lifetime ban on serving as a director or officer of a public company.² A $100 million class action lawsuit against Ja Rule and Grant Margolin was dismissed in July 2019 for insufficient evidence.²

In 2021, a settlement was reached in a class-action lawsuit, with 277 ticket holders receiving $7,220 each from a $2 million fund.¹⁸ Many attendees reported not receiving refunds, though some obtained refunds through their banks or credit card companies.² A North Carolina judge awarded $5 million in damages to two attendees who sued McFarland in 2018.¹⁸ Kendall Jenner agreed to pay $90,000 for promoting the festival in a social media post.¹⁸ The bankruptcy court granted a default judgment in favor of the Chapter 7 trustee against Fyre Media Inc. et al. in February 2020.¹⁶

Legal outcomes

• pleadedBilly McFarland pleaded guilty to two counts of wire fraud related to the Fyre Festival.¹⁸
• convictedBilly McFarland was sentenced to six years in prison and ordered to pay over $26 million in restitution.²
• chargedThe SEC charged McFarland, Fyre Media, Magnises, Grant Margolin, and Daniel Simon with a multi-year offering fraud.¹³
• settledMcFarland settled with the SEC, agreeing to a lifetime ban on serving as a director or officer of a public company.²
• dismissedA $100 million class action lawsuit against Ja Rule and Grant Margolin was dismissed in July 2019.²
• settledA class-action settlement in 2021 provided $2 million to 277 ticket holders.¹⁸
• settledA North Carolina judge awarded $5 million in damages to two attendees who sued McFarland.¹⁸
• settledKendall Jenner agreed to pay $90,000 for promoting the festival.¹⁸
• settledThe bankruptcy court granted a default judgment in favor of the Chapter 7 trustee against Fyre Media Inc. et al.¹⁶

Where the founders are now

Billy McFarland was sentenced to six years in prison in October 2018.² McFarland was ordered to pay more than $26 million in restitution.² Ja Rule has not faced criminal charges and said he was scammed by McFarland.²

Sources

2. Fyre Festival: How a 25-year-old scammed investors out of $26 million, CNBC, 2019-08-18
5. Fyre Festival Pitch Deck (2017): 43-Slide Breakdown, startupfundraising.com, Aug 22, 20
6. Fyre Festival founder's legal woes cause his NYC startup to ..., bizjournals.com, Aug 31, 20
7. How hubris took down the Fyre Festival, campaignlive.com, May 20, 20
8. How Fyre Festival turned out to be a festive disaster- Awfis, Awfis, 2019-02-28
13. Billy McFarland, Fyre Media, Inc., Magnises, Inc. Grant Margolin and Daniel Simon Charged by SEC – Goodman & Nekvasil P.A. May Recover Investor Losses, Goodman & Nekvasil, P.A., 2020-07-22
14. Fyre festival founder to staff: we can, the Guardian, 2017-05-12
15. Exclusive audio: Fyre Festival founders reveal to employees nobody's getting paid, VICE, 2017-05-11
16. In Re: 19-01340-mg Gregory M. Messer, as Chapter 7 Trustee of the Est v. Fyre Media Inc. et al | Southern District of New York | United States Bankruptcy Court, nysb.uscourts.gov, Feb 11, 20
18. Hundreds Of Fyre Festival Ticket Holders Poised To Win Payout In Class-Action Suit, NPR, 2021-04-16

How this case file was put together

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