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Fyre Festival CEO allegedly lured investors with fake deals with celebrities

by Gabrielle Bluestone
Jul 2 2017, 11:14am

Fyre Festival founder and CEO Billy McFarland was arrested Friday and charged with one count of wire fraud for allegedly lying to investors to induce them to give him money. One of his methods, court records show, was to suggest big-name performers like Drake, Kendrick Lamar, and Chance the Rapper were generating income for the company.

McFarland was the principal organizer of the disastrous Fyre Festival, which billed itself as a luxury music festival experience, but left attendees stranded in a few hundred FEMA-style tents arrayed in a gravel pit next to a Sandals resort. The fiasco, which played out in real time across social media, left hundreds of millennials stuck in the Bahamas and millions of dollars unaccounted for.

READ: Fyre Festival founder arrested and charged with wire fraud

Though McFarland also owes money to ticket holders, vendors, and his own employees, the criminal complaint focuses specifically on the alleged lies McFarland used to lure in additional investors in the final weeks leading up to the festival. Former employees familiar with the matter say he was running out of money and needed the investments in order to keep the festival afloat.

“In order to procure these investments, McFarland provided materially false information. For example, McFarland told investors that Fyre Media earned millions of dollars of revenue from thousands of artist bookings from at least July 2016 until April 2017. In reality, during that approximate time period, Fyre Media earned less than $60,000 in revenue from approximately 60 artist bookings,” acting United States Attorney for the Southern District Joon Kim said in a statement Friday.

The complaint does not name the investors, but sources familiar with the matter say the victim identified as “Victim-1” is Oleg Itkin, a financier who loaned the festival $700,000 and later sued McFarland after the festival collapsed.

Calls to Itkin were not returned.

READ: Exclusive audio: Fyre Festival founders reveal to employees nobody’s getting paid

According to the complaint, “Victim-1,” who was still mulling whether or not to invest, requested a booking sheet to support McFarland’s claims that the company had earned $44 million in March and was on track to earn $50 million in April.

“Any break down details. Maybe by artist or something like that. It’s a mind boggling number per month and u have not started fully marketing yet! I’m really curious to understand how that happens,” Itkin wrote to McFarland, who responded with a list of artists purportedly booked through Fyre Media.

The list, which was filed as an exhibit in Itkin’s civil case, claims Drake, Kendrick Lamar, Lil Wayne, J Cole, Future, Big Sean, Chance the Rapper, ASAP Rocky, 2 Chainz and Rae Sremmurd were booked for performances through the app.

A former Fyre Media employee familiar with the company’s bookings says that although some of those artists were “requested” by users on the app, none were ever booked and none ever generated revenue for the company. Nor is it clear if the company had the ability to book those artists at all. The booking sheet, however, indicated the artist booking fees had brought in more than $13 million in gross for Fyre.

READ: Rich millennials paid thousands for Ja Rule’s Fyre Fest and are now stranded on an island in disaster-relief tents

A rep for Drake, Kendrick Lamar, and Chance the Rapper could not immediately be reached. Reps for Lil Wayne, J Cole, Future, Big Sean, ASAP Rocky, 2 Chainz, and Rae Sremmurd did not return a request for comment.

The criminal complaint also alleges McFarland used a fraudulent Scottrade statement showing he owned more than $2.5 million in stock to secure the loans. In reality, prosecutors say, he owned less than $1,500.

McFarland was arrested at his home in the Meatpacking District in Manhattan on Friday and taken into federal custody. It’s not clear who is representing McFarland, whose legal team Hughes, Hubbard & Reed LLP was substituted Wednesday by incoming counsel Michael Levin, a Westchester attorney. Reached by phone, Levine denied any involvement in the criminal litigation and said his only role was as local counsel for a California firm, which he declined to name.

READ: Fyre Festival’s 25-year-old organizer: “This is the worst day of my life”

McFarland was released from jail on Saturday afternoon on a $300,000 bond, accompanied by public defender Sabrina Shroff. Under the terms of his release, he may not travel outside of the southern or eastern districts of New York or New Jersey, and will be subject to random drug testing.