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Exclusive documents reveal Fyre Festival's "shitshow" ticket scheme

Fyre Festival founder Billy MacFarland ran a concert ticket buying scheme that blended the finances of his two companies, credit card records show.

by Gabrielle Bluestone
Sep 8 2017, 2:10pm

In the five months since the spectacular collapse of the Fyre Festival, a multi-day music festival for well-heeled millennials in the Bahamas, its 26-year-old founder, Billy McFarland, has been hit with a dozen-odd civil lawsuits, charged with federal wire fraud, and had one of his companies, Fyre Festival LLC, placed in an involuntary bankruptcy. For now, he’s still the CEO of Magnises, an all-but-defunct members-only concierge service.

But new documents exclusively obtained by VICE News show he may still have further to fall. Credit card records show that the fates of McFarland’s two companies became deeply entwined late last fall as he used a Fyre Festival corporate credit card to pay for discounted concert tickets Magnises offered as an exclusive member benefit.

The records, which were verified by two former Fyre Media employees who also had access to the account, show that in a span of just four months, McFarland used his corporate Fyre Media American Express card to purchase more than $1 million worth of tickets from Stubhub, Vivid Tickets, and Ticketmaster, which he then sold to Magnises members, often at a significant loss.

McFarland ultimately declined to pay off the card’s full balance, and one former employee who acted as a signatory on the card says he was left on the hook for more than $200,000. The employee, MDavid Low, a Portland, Ore.-based creative director whose job was to build the Fyre booking app, says his credit was also destroyed because of McFarland’s nonpayment.

“Mr. McFarland casually arranged for Mr. Low to open a Fyre company credit card for folks who worked with Fyre, including Mr. McFarland himself, and then proceeded to spend hundreds of thousands of dollars on himself and his other businesses. He lied to whoever he needed to in order to prolong the ruse,” Low’s attorney, Grant Engrav, said in a statement to VICE News Wednesday.

McFarland’s attorneys representing him in the criminal case, Karen Chesley and Randall W. Jackson of Boies, Schiller and Flexner LLP, declined to comment on any of the allegations. VICE News was unable to identify any charges that definitively confirmed or disproved Engrav’s accusations that McFarland spent company funds on himself.

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

Records show that Gold American Express business cards linked to Fyre Media’s $100,000 line of credit were issued to at least nine employees, including Low, co-founder Ja Rule, and the festival’s marketing director, Grant Margolin. The charges incurred by those employees appear reasonably related to the Fyre Media business. But between September 2016 and February 2017, the card issued in McFarland’s name was used for more than $1.1 million worth of purchases from sites like StubHub, Ticketmaster, and Vivid Seats.

The problem? Fyre Media — which was launched as an app for regular people to book performing artists for private events and eventually evolved into the ill-fated music festival — did not at any point sell or issue tickets sold on those websites, several former employees confirmed.

But Magnises did. Former employees from both Fyre and Magnises say McFarland would routinely sell Magnises members “discounted” tickets that he didn’t actually possess for popular events. Then, former employees and former members say, McFarland would cancel the reservations at the last minute or supply similar seats purchased from third-party brokers like StubHub, VividSeats, or TicketMaster.

READ: Fyre Festival organizers blew all their money early on models, planes, and yachts

The charges also indicate that McFarland was, in part, funding Magnises with credit tied to Fyre Media, just months before the dramatic meltdown of the Fyre Festival, now the subject of a dozen or so civil and criminal fraud allegations.

“Billy seemed to get a lot of family friends to be investors in his companies. They were probably investing anywhere between $50,000 and $150,000 with him in either of his companies. There were some cases where Magnises investors wouldn’t invest in Fyre and vice versa, but I think he basically shared the same pool of investors,” a former Magnises employee said. The employee asked to remain anonymous because he’d signed a contract containing a non-disparagement clause.

Reached by phone, Michael Quinn, an attorney representing three people who lent the festival a combined $530,000, declined to comment.

McFarland, a college dropout from an affluent family in New Jersey, launched Magnises, which he once bragged was “Latin for absolutely nothing,” as a millennial version of the AmEx black card concierge service. Magnises’ operations were based out of a townhouse in Manhattan’s West Village; though the owner of the townhouse went on to sue McFarland for $100,000 in damage to the property. McFarland disputed allegations and the case later settled. Magnises’ then-headquarters moved to a Manhattan hotel before relocating permanently to a WeWork space.

Read: Fyre Fest CEO allegedly lured investors with fake deals

But it was never totally clear if Magnises, which raised $1.5 million in seed funding from the VC firms Deep Fork Capital and Great Oaks Venture Capital, was generating much money. McFarland’s estimate of how many members were actively paying the annual $250 dues varied wildly. In 2014, he claimed 1,200; in September 2016, he said 30,000; and two months later, he told a Portugal audience 100,000. Months later, in a January 2017 interview with Business Insider, McFarland claimed the service had 40,000 members.

Former employees’ recollections are bolstered by the credit card records. In fact, most of the Stubhub, Ticketmaster, Vivid Seats, and Fan Exchange charges on McFarland’s Fyre American Express card correspond with events advertised by Magnises — meaning that if McFarland was indeed using the card to fund the Magnises ticket business, he was purchasing most, if not all, of them on the same day the events were scheduled to take place.

Jack Sharman, a white-collar defense attorney who also served as special counsel to the House Banking Committee during the Whitewater investigation in the ’90s, says that analyzing whether McFarland broke any laws by using Fyre to fund Magnises will boil down to a question of intent.

“If he had fraudulent intent, that is to say, to rip off his investors, that could be a state or maybe a federal securities claim. On the other hand, if what you’re talking about essentially gross mismanagement — somebody bad at running the company, who had a bad idea how to finance it, and used his investors’ funds improperly — that might be grounds for a lawsuit by those investors,” Sharman explained.

It wasn’t just money that crossed between the two distinct companies. McFarland also assigned Magnises employees to do work for the Fyre app, and often in secret, the former Magnises employee said.

Scared of getting fired, the former Magnises employee says he completed all the Fyre Media-related work McFarland assigned to him even though it wasn’t his job or even his company. “[McFarland] is kind of like a car salesman, but you don’t realize the car you bought is a piece of shit until you drive away with it,” said the former employee.

To raise cash, McFarland repeatedly offered tickets he did not own to Magnises subscribers as an insider deal, and then bought those tickets later, often at a substantial loss. Here are some ticket deals that nearly sunk the company:

The Adele “shitshow”

The former Magnises employee says things were still generally going well at the company — that is, “until the Adele concert in September.”

In 2016, Adele put on a series of six shows at Madison Square Garden, performing live on Sept. 19, 20, 22, 23, 25, and 26. The shows went on sale in December 2015 and sold out in minutes.

But the former employee said it revealed that McFarland did not have access to the discounted ticket deals he claimed.

“What happened with Adele was that we found out that Billy wasn’t going through a source in Live Nation at all, because for that concert, there were no e-tickets available; the whole thing was all ticket stubs,” the former employee said. “We had to go and meet with these brokers who act as third-party buyers around MSG. And we’re spending the whole time running around the city trying to get them together and figure out how many they have and who’s going to go in which section.”

Records show McFarland’s Fyre credit card was used to pay for more than 100 orders on sites like Stubhub, Vivid Seats, Fan Exchange, and My Ticket Tracker that totaled more than $150,000. The orders were spread across a series of dates including September 19, 20, 22, 23, 25 and 26 — the days Adele performed. The records show no tickets were charged to the card on September 21 and 24 — the days when she did not perform.

The 100-odd orders also left Magnises employees scrambling across the city, picking up tickets and delivering them to members just hours — and sometimes minutes — before the shows.

“It was a shitshow, but we were able to get most of these people to their Adele concert,” the former employee said. “Not everyone got the seats they were promised, because they were all promised front-row floor section, and obviously for this concert there were not many of those left, so Billy ended up buying just a bunch of 100-levels and then saying, ‘Hey, this is the best we can do, blah blah blah.’”

Hamilton

Though most of the secondary ticket market charges on McFarland’s Fyre corporate American Express card do not reference any specific events, there are a series of Vivid Seats charges totaling almost $30,000 and labeled “Hamilton.”

The transactions, which were spread across multiple purchases that add up to about $28,892.02, were all billed as “VIVID SEATS HAMILTON*VIVID SEATS,” and secured using McFarland’s Fyre credit card on January 6. The cheapest ticket or set of tickets in the bunch was $1,401.30.

The former Magnises employee says the Hamilton tickets were sold to Magnises members for a mere $250 a piece, estimating that McFarland probably took a loss of at least $1,200 a ticket on each Hamilton reservation that wasn’t canceled.

Kanye West’s Saint Pablo tour

In June 2016, Magnises sent out a blast email offering members floor-level tickets for Kanye West’s Madison Square Garden shows for a discounted price.

“Kanye just released the dates for his highly anticipated Saint Pablo tour. We want to get you in some of the best seats in the house,” the June 15 email read. “These discounted tickets get you access to Floor Level seats for $275 each and are available for either show at Madison Square Garden: Monday, September 5, and Tuesday, September 6. Ticket quantities are limited, so be sure to reserve yours today.”

Tickets for both shows went on sale in June and quickly sold out. In June, Forbes reported the median resale ticket was listed at $375 — $100 more than McFarland was charging his members.

The Fyre American Express records show that on September 5 — the date of the first show — McFarland used the card to purchase more than $10,000 worth of Kanye West tickets in nine separate Ticketmaster transactions ranging from $602.35 to $2,068.00.

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