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SEC Charges Failed Fyre Festival Founder and Others with $27.4M Offering Fraud
- deleted 8y ago[deleted]
- sschueller 8y agoWhat about the people who promoted it without disclosing that they were paid to promote it? Certein Instagram celebrities come to mind.
- nerdponx 8y agoIf they weren't in on the fraud, I'm not sure they should be held responsible.
- hartator 8y agoIt dependa on how they presented it. If they didn’t say clearly it was an ad, or a sponsor, I think they should be held responsible.
- deleted 8y ago[deleted]
- JumpCrisscross 8y ago> 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.
- ceejayoz 8y agoIf paid product placement without a disclaimer is illegal, I'm not sure any major movies or TV shows are on good legal footing.
- sschueller 8y agohttp://adage.com/article/digital/ftc-cracking-social-influencers-labeling-promotions/305345/ http://adage.com/article/digital/ftc-cracking-social-influen...
- ceejayoz 8y agoHuh, TIL! It seems very weird to apply this to Instagram and not movies, where undisclosed product placement is rampant.
- oddevan 8y agoI know there's a huge swath of "promotional consideration" names at the end of a lot of shows now, so that might be where they dump a bunch of that stuff?
- gowld 8y agoThat's standard for game show prizes, obviously. I didn't realize it spread to other TV.
- _bxg1 8y agoI think the difference is that celebrities and "influencers" are real (-ish) people, so if they say they recommend something, that's an actual piece of anecdotal data when deciding whether or not you want to buy into it yourself. If somebody in a movie says they're going to Fyre Festival, that might loosely associate the thing in your mind with "coolness" or whatever, but you're not going to mistake it for an actual endorsement from a real person.
- n8henry 8y agoI think the law actually states that media that is meant to be shown in a theater is exempt. I guess as to not take away from the experience of watching the movie.
- JumpCrisscross 8y agoThere are eight lawsuits in play; one has been settled [1]. [1] https://en.wikipedia.org/wiki/Fyre_Festival#Lawsuits https://en.wikipedia.org/wiki/Fyre_Festival#Lawsuits
- lozenge 8y agoThe FTC's endorsement guide was only published in September 2017. Before then, nobody was following the rules. It would be pointless to pursue those who promoted Fyre Festival specifically, and impossible to pursue everybody.
- darpa_escapee 8y agoThe guide is just that, a guide. It was published in an era where everyday YouTubers/Yelp reviewers/MLMs/affiliate marketers/etc, without the means to afford a legal team, are approached with endorsement deals. In the past, it was typically established celebrities or businesses who were approached for endorsement. The law behind the guide, Section 5 of the FTC Act, has been on the books for quite some time. The guide serves as an easily parsable reminder of that law.
- s73v3r_ 8y agoI'm fairly certain there were regulations related to endorsement disclosure long before that guide was published.
- JumpCrisscross 8y agoBilly 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)#cite_note-27 https://en.wikipedia.org/wiki/Billy_McFarland_(entrepreneur)... [2]https://www.nytimes.com/2018/06/12/arts/fyre-festival-organizer-fraud.html https://www.nytimes.com/2018/06/12/arts/fyre-festival-organi...
- kennxfl 8y agoYes. I read this. It seems he was so brazen to commit fraud even after he had been charged. I'm not a psychiatrist but its either he is a egomaniac sociopath or just really unintelligent.
- nostromo 8y ago> Not sure how someone becomes this irredeemable at just twenty-seven year old. How is this a function of age?
- jumpman500 8y ago> 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-seth-rogen-and-the-lonely-island-say-they-planned-film-about-music-festival-gone-wrong https://www.eonline.com/news/847110/fyre-festival-the-movie-...
- ng12 8y agoThat's my favorite bit. I guess a passing knowledge of Chrome developer tools is all you need to fraudulently raise $27m.
- stryk 8y agoI'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.
- everdev 8y agoReferrals are huge for VCs and maybe that's the reason. If they're going to take a huge risk they want some level of trust and the fastest way to establish that is if you've already gained the trust of one of their friends. It looks pretentious from the outside, but it does help ensure fewer fraudsters get in to pitch them.
- gowld 8y agoThis is why "equality of opportunity" social reforms have to start with people in childhood, and the older the subject, the less likely the efforts are to succeed.
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- tunesmith 8y ago"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 8y agoDefinitely 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."
- draw_down 8y agoWell, it did turn out that way in a manner of speaking.
- stephengillie 8y agoThis is inherently the same as YOLO.
- r00fus 8y agoSounds like a contender for public office in a GOP administration.
- AJC-Official 8y ago36 Republicans in a federal position have been convicted of a crime while in office since 1900. Meanwhile, 48 Democrats have been convicted in the same period. [0] [0]https://en.wikipedia.org/wiki/List_of_American_federal_politicians_convicted_of_crimes#1777%E2%80%931897 https://en.wikipedia.org/wiki/List_of_American_federal_polit... Note for fact checkers: Search 'D-' or 'R-' and go through the listing to avoid the few non-political party references.
- lordCarbonFiber 8y agoBecause a 100 year span is definitely relevant to current events (and nevermind that both parties have shifted drastically over the 20th century). Nice choice of window, also good call to expand the scope to federal position as opposed to people in the legislative branch. Crafting misleading narratives sure is fun isn't it?
- lainga 8y agoThe count between 1961 and now is 46 Democrats to 48 Republicans, which includes all the Watergate convictions.
- floren 8y agoA good point. Counting from Reagan forward, you get 33 R, 30 D. Of course, that only gives you 2 Democrat presidents and 4 Republican, so if you step back and include Carter, you get 36 R, 35 D.
- dragonwriter 8y agoI haven't gone through the whole list, but the handful I did go through includes internal rules violations adjudicated by the House or Senate, and impeachments, as well as convictions by criminal courts. Rule violations aren't criminal convictions in any sense; impeachments (with convictions in the Senate) are, in a sense, but not strictly comparable to conviction by a criminal court.
- _bxg1 8y agoSeems 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 8y agoIt'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 8y agoSeems 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
- deadmetheny 8y agoHe's plead guilty to wire fraud since then, which may have a substantial prison sentence.
- freeone3000 8y agoThis is just the SEC's portion of the fine. They mention that the fine will be deemed as paid from the concurrent criminal trial. I'd look at that for actual punishment.
- stickfigure 8y agoOne thing I learned from reading Matt Levine's Money Stuff column: The SEC does not itself have the power to engage in criminal prosecutions; it refers cases to the justice department (or other law enforcement agencies) for prosecution. That's why you always see these sort of consent decrees ("here's some money and I promise not to do it again") from the SEC. This guy is going to jail (err, is already in jail) but it's not the SEC's job to put him there.
- ergothus 8y ago> 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-pleads-guilty-manhattan-federal-court-defrauding-investors-and-ticket https://www.justice.gov/usao-sdny/pr/william-mcfarland-plead... That forfeiture does NOT look like a slap on the wrist
- beager 8y agoI 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 8y agoYou 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.
- Animats 8y agoMcFarland 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-billy-mcfarland-arrested-for-new-ticket-selling-scam-1202844282/ https://variety.com/2018/biz/news/fyre-festival-founder-bill...
- selestify 8y agoI don't understand why you would keep doing the very thing people are investigating you for.
- gowld 8y agoDo what you know.
- EliRivers 8y agoHe was just following his passion :)
- Animats 8y agoWho knows? It's not unusual criminal behavior, though. "One last score". Possibly an attempt to get some quick cash and flee the country. If so, it didn't work.
- cal5k 8y agoWhy do alcoholics continue to drink, even though they know they’re harming themselves? Compulsive behaviour is interesting.
- pcwalton 8y agoTo paraphrase Popehat: The kind of personality that gets people into trouble in the first place also compels people to dig deeper once they're in trouble.
- efficax 8y agofailed fyre festival founder, that's quite a tongue twister.
- tlrobinson 8y agoThis 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-the-magician-of-manhattan https://www.vanityfair.com/news/2018/04/my-misadventure-with... 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-festival-billy-mcfarland.html https://www.thecut.com/2018/07/anna-delvey-scams-fyre-festiv... 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 8y agoWhat'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 8y agoThe 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.
- draw_down 8y agoWait, what does she have to do with this?!
- stevekemp 8y agoThe story of Anna Delvey was fascinating to read. I can't help wondering if she was a sex-worker, it would cover a lot of the points in the story - the travel, the money, and the fact that people are clearly covering up details.
- narrator 8y agoThis 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 8y agoProbably 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.