throbber
Case 1:17-mj-04988-UA Document 1 Filed 06/30/17 Page 1 of 7
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`Approved:
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`l 'l MAG
`ORIGINAL
`~le jf~r • 4 9 8 8 \l~.OI~~~
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`STY J. GREENBERG
`Assistant United States Attorney
`
`Before:
`
`HONORABLE KEVIN NATHANIEL FOX
`United States Magistrate Judge
`Southern District of New York
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`UNITED STATES OF AMERICA
`
`- v. -
`
`WILLIAM McFARLAND,
`
`Defendant.
`
`SEALED COMPLAINT DOG#j_
`
`Violations of
`18 u.s.c. §§ 1343 & 2
`
`COUNTY OF OFFENSE:
`NEW YORK
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`SOUTHERN DISTRICT OF NEW YORK, ss.:
`
`BRANDON RACZ, being duly sworn, deposes and says that
`he is a Special Agent with the Federal Bureau of Investigation
`(the "FBI"), and charges as follows:
`
`Count One
`
`(Wire Fraud)
`
`From at least in or about late 2016, up to and
`1.
`including in or about May 2017, in the Southern District of New
`York and elsewhere, WILLIAM McFARLAND,
`the defendant, willfully
`and knowingly, having devised and intending to devise a scheme
`and artifice to defraud, and for obtaining money and property by
`means of false and fraudulent pretenses,
`representations and
`promises,
`transmitted and caused to be transmitted by means of
`wire,
`radio,
`and
`television communication
`in
`interstate and
`foreign commerce, writings, signs, signals, pictures, and sounds
`for the purpose of executing such scheme and artifice, to wit,
`McFARLAND engaged in a scheme to induce others to make financial
`investments in Fyre Media LLC
`( "Fyre Media") , a digital media
`company controlled and operated by McFARLAND, by, among other
`things, making false representations about Fyre Media's revenue
`and McFARLAND's own finances, and in connection therewith and in
`
`1
`
`

`

`Case 1:17-mj-04988-UA Document 1 Filed 06/30/17 Page 2 of 7
`
`thereof, McFARLAND caused wire communications and
`furtherance
`wire transfers of funds to be sent in interstate commerce.
`
`(Title 18, United States Code, Sections 1343 & 2.)
`
`the
`for
`for my knowledge and
`The bases
`charge are, in part and among other things, as follows:
`
`foregoing
`
`I am a Special Agent with the Federal Bureau of
`2.
`("FBI") .
`I have been an FBI Special Agent for
`Investigation
`two years and
`I
`am assigned to a White Collar
`approximately
`Fraud squad within the New York Division. As part of my work at
`the FBI,
`I have received training regarding fraud and white
`collar crimes.
`I am familiar with the facts and circumstances
`set
`forth
`below
`from my
`personal participation
`in
`the
`investigation, including my examination of reports and records,
`interviews
`I have conducted, and conversations with other law
`enforcement officers and other
`individuals.
`Because
`this
`affidavit
`is being
`submitted
`for
`the
`limited purpose of
`establishing probable cause, it does not include all the facts
`that
`I have
`learned during
`the course of my
`investigation.
`Where the contents of documents and the actions, statements and
`conversations of others are reported herein,
`they are reported
`in substance and in part, unless noted otherwise.
`
`THE DEFENDANT AND HIS COMPANY
`
`At all times relevant to this Complaint, WILLIAM
`3.
`the defendant, was
`the founder and Chief Exe cu ti ve
`McFARLAND,
`Officer of Fyre Media.
`In 2016, McFARLAND started Fyre Media to
`build a digital app
`that would allow
`individuals organizing
`commercial events,
`such as concerts,
`to bid for artist and
`celebrity bookings at such events.
`According to Fyre Media
`documents provided
`to
`investors by McFARLAND,
`Fyre Media's
`historical and projected revenue from at least April 2016
`to
`November 2017 consisted solely of artist bookings.
`
`the defendant,
`In late 2016, WILLIAM McFARLAND,
`4.
`established a subsidiary of Fyre Media known as Fyre Festival
`LLC and began promoting a music festival set to take place over
`two weekends in the Bahamas
`(the "Fyre Festival"). McFARLAND
`promoted the Fyre Festival in part by claiming that it would
`bring a global audience
`together
`to share a
`life changing
`experience. Ultimately, the Fyre Festival was widely deemed to
`have been a failure.
`
`2
`
`

`

`Case 1:17-mj-04988-UA Document 1 Filed 06/30/17 Page 3 of 7
`
`OVERVIEW OF THE SCHEME TO DEFRAUD
`
`the
`forth below, WILLIAM McFARLAND,
`set
`As
`5.
`a
`scheme
`to defraud
`individuals by
`defendant, perpetrated
`investors to invest approximately $1. 2
`inducing at least two
`million dollars in Fyre Media and Fyre Festival LLC based upon
`misrepresentations about Fyre Media's
`revenue and
`income.
`In
`furtherance of
`the
`scheme McFARLAND provided
`to
`investors
`material information that was false.
`For example, contrary to
`representations to investors by McFARLAND that Fyre Media earned
`millions of dollars of revenue from at least July 2016 until
`April 2017, a review of Fyre Media's records shows that, during
`that
`same
`timeframe, Fyre Media earned significantly
`less
`revenue.
`Furthermore, in order to induce at least one investor
`to make an
`investment
`in Fyre Media, McFARLAND provided an
`altered stock ownership statement
`to
`inflate
`the number of
`shares he purportedly owned, so it would appear that McFARLAND
`could personally guarantee the investment.
`
`MCFARLAND'S MISREPRESENTATIONS TO VICTIM-INVESTORS
`ABOUT FYRE MEDIA'S REVENUE
`
`( "Victim-1"
`individuals
`two
`From speaking with
`6.
`and "Victim-2") who invested in Fyre Media and Fyre Festival LLC
`based in part upon misrepresentations by WILLIAM McFARLAND,
`the
`defendant,
`and
`reviewing documents provided by Victim-1 and
`Victim-2,
`I
`have
`learned,
`in substance
`and
`in part,
`the
`following:
`
`Victim-1
`
`From in or about February 201 7 , up to and
`a.
`including in or about April 2017, Victim-1 made a series of
`investments
`in Fyre Media
`and Fyre Festival LLC
`totaling
`approximately $700, 000.
`On one occasion on February 14, 2017,
`Victim-1, who was
`in London, England, wired an
`investment of
`$200,000 to a Fyre Media bank account in New York, New York.
`
`b. Victim-1 was first introduced to McFARLAND
`in or about early 2017. McFARLAND told Victim-1 that McFARLAND
`wanted to raise capital for Fyre Media. On or about February 8,
`2017, McFARLAND emailed Victim-1 a Private Placement Memorandum
`(the "Memorandum") concerning Fyre Media and the Fyre Festival.
`
`3
`
`

`

`Case 1:17-mj-04988-UA Document 1 Filed 06/30/17 Page 4 of 7
`
`"[s]ince
`the Memorandum,
`to
`c. According
`launching in May 2016,
`thousands of offers representing tens of
`millions of dollars of performances and appearances have been
`made and accepted with Fyre."
`
`The Memorandum also provides Fyre Media's
`d.
`purported financials in an appendix consisting of a statement
`detailing Fyre Media's income from April through December 2016,
`and the projected income from January through November 2017 (the
`"Fyre Media Income Statement"). The Fyre Media Income Statement
`shows millions
`in
`revenue derived solely
`from
`thousands of
`artist bookings.
`McFARLAND confirmed
`to Victim-1
`that
`the
`numbers
`reflected
`in
`the Fyre Media
`Income Statement were
`accurate.
`
`On or about April 24, 2017, Victim-1 asked
`e.
`McFARLAND to send "the latest on bookings," to which McFARLAND
`replied,
`"$44
`for march and April will be
`just under $50 ! "
`Victim-1 understood McFARLAND
`to be referring to 44 million
`dollars and 50 million dollars, respectively,
`in revenue from
`bookings with Fyre Media. Victim-1 asked again for "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! Im really curious to understand how it happens."
`
`emailed
`later, McFARLAND
`an hour
`About
`f.
`"Offers"
`and
`stated
`"See
`the
`subject
`line
`Victim-1 with
`attached. Will share Feb and March once finalized." Attached to
`the email was a spreadsheet containing a list of artists with
`the dates of purportedly confirmed bookings with Fyre Media from
`December 2016-January 2017,
`the booking amounts, and assorted
`information about
`the buyer for each booking
`(the "McFarland
`Fyre Media Booking Chart").
`
`information about
`to Victim-1,
`g. According
`Fyre Media's revenue from bookings was
`important to Victim-1' s
`decisions to invest in Fyre Media and Fyre Festival LLC.
`
`Victim-2
`
`in orP.P.. about
`From
`h.
`including April 2017, Victim-1r"'made a
`Fyre Media
`and Fyre Festival
`LLC
`$500,000.
`
`to and
`up
`late 2016,
`series of investments in
`totaling
`approximately
`
`i. Victim-2 first met McFARLAND at Fyre Media's
`office in New York, New York in or about late 2016. During that
`4
`
`

`

`Case 1:17-mj-04988-UA Document 1 Filed 06/30/17 Page 5 of 7
`
`meeting,
`bookings
`received
`McFARLAND
`
`that Fyre Media had artist
`told Victim-2
`McFARLAND
`of up
`to $10, 000, 000 per month, of which Fyre Media
`a
`ten percent cut.
`On or about January 29, 2017,
`provided the Fyre Media Income Statement to Victim-2.
`
`information about
`to Victim-2,
`j. According
`Fyre Media's revenue from bookings was important to Victim-2' s
`decisions to invest in Fyre Media and Fyre Festival LLC.
`
`Employee-1
`
`former Fyre Media employee
`From speaking with a
`7.
`( "Employee-1"), reviewing documents provided by Employee-1, and
`reviewing Company records,
`I have learned,
`in substance and in
`part, the following:
`
`Employee-1 worked at Fyre Media from in or
`a.
`about May 2016, up
`to and
`including
`in or about May 2017.
`Employee-1 was responsible for overseeing talent relationships
`and bookings of artists for Fyre Media.
`
`Employee-1 tracked all bookings from in or
`b.
`about May 2016, up to and including in or about April 2017, on a
`spreadsheet (the "Employee-1 Fyre Media Booking Chart").
`In the
`course of Employee-1' s work at Fyre Media, WILLIAM McFARLAND,
`the defendant, had access to the Employee-1 Fyre Media Booking
`Chart. Moreover, Employee-1 updated McFARLAND and other Fyre
`Media employees on
`the number of bookings and corresponding
`revenue at weekly Fyre Media meetings.
`
`The Employee-1 Fyre Media Booking Chart
`c.
`shows that from in or about May 2016, up to and including in or
`about April
`2017,
`only
`60 bookings
`for performances
`and
`appearances were confirmed and paid.
`The fees paid to Fyre
`Media as a result of these 60 bookings totaled only $57,443.
`
`During my interview of Employee-1, Employee-
`d.
`shown a copy of
`the Fyre Media
`Income Statement, and
`1 was
`reported never having seen it before. Employee-1 also could not
`identify any basis for the thousands of bookings and millions in
`revenue represented on the Fyre Media Income Statement.
`
`Based on my comparison of the Fyre Media Income
`8.
`Statement with
`the Employee-1 Fyre Media Booking Chart,
`it
`appears
`that
`the Fyre Media
`Income Statement
`that McFARLAND
`provided
`to Victim-1
`and Victim-2 overstates Fyre Media's
`revenue, profits and
`income.
`For example, Fyre Media Booking
`5
`
`

`

`Case 1:17-mj-04988-UA Document 1 Filed 06/30/17 Page 6 of 7
`
`in total
`received $57,443
`the Fyre Media
`that
`shows
`Chart
`revenue from confirmed bookings for the entire time period from
`May 2016
`to April 2017.
`However,
`the Fyre Media
`Income
`Statement
`represents
`that Fyre Media's
`income
`from bookings
`during only a subset of that timeframe (August 2016 to December
`2016)
`ranged from hundreds of thousands of dollars to over $1
`million per month.
`
`Based on my review of the McFarland Fyre Media
`9.
`Booking Chart and the Employee-1 Fyre Media Booking Chart, it
`appears that the McFarland Fyre Media Booking Chart dramatically
`overstates the number and dollar amounts of Company bookings.
`For example,
`the Bmployee-1 Fyre Media Booking Chart shows 60
`closed and paid bookings over a
`roughly year-long period. By
`contrast,
`the McFarland Fyre Media Booking Chart lists 4, 637
`confirmed bookings between December 1, 2016 and January 31,
`2017.
`Similarly,
`in many instances, the total booking amounts
`reflected in a single day in the McFarland Fyre Media Booking
`Chart exceeded the total actual booking amounts over 15 months
`in
`the Employee-1 Fyre Media Booking Chart. Moreover,
`the
`Employee-1 Fyre Media Booking Chart does not show any artist
`being paid more than $45,000 for a single booking. By contrast,
`the McFarland Fyre Media Booking Chart shows several bookings
`exceeding $300,000 each,
`and numerous bookings
`for amounts
`greater than $100,000.
`
`MCFARLAND'S MISREPRESENTATIONS TO VICTIM-1 ABOUT HIS OWN ASSETS
`
`10. From speaking with Victim-1, who invested in
`and
`Fyre
`Festival
`LLC
`based
`in
`part
`Media
`misrepresentations by WILLIAM McFARLAND,
`the defendant,
`reviewing documents provided by Victim-1,
`I have
`learned,
`substance and in part, the following:
`
`Fyre
`upon
`and
`in
`
`regarding
`McFARLAND
`company's
`
`the
`a. During
`Victim-l's potential
`represented
`that he
`stock (the "Stock")
`
`course of
`investments
`owned shares
`
`their discussions
`in
`the Company,
`of
`a particular
`
`On April 24, 2017, McFARLAND and Victim-1
`b.
`executed a revenue share agreement in which Victim-1 agreed to
`invest $200,000 in Fyre Festival LLC, with a 120% return, or 5%
`of the Fyre Festival revenue, whichever was greater, due on or
`before May 1, 2017. The Company guaranteed the 120% return on
`Victim-l's investment on or before May 1, 2017; and the return
`was guaranteed in entirety by McFARLAND' s Stock. Attached to
`the agreement was a Scottrade statement provided by McFARLAND
`6
`
`

`

`Case 1:17-mj-04988-UA Document 1 Filed 06/30/17 Page 7 of 7
`
`that purported to show McFARLAND's ownership in the Stock (the
`"Fake Scottrade Statement").
`
`Statement
`The Fake Scottrade
`c.
`in Stock.
`show that McFarland owned $2,565,079.18
`
`purported
`
`to
`
`in part on McFARLAND's
`least
`Relying at
`d.
`personal guarantee of Victim-l's investment, as reflected in the
`Fake Scottrade Statement, Victim-1 invested in Fyre Festival LLC
`on April 24, 2017.
`
`from
`review of records obtained
`11. Based upon my
`the
`Scot trade for an account belonging to WILLIAM McFARLAND,
`defendant,
`I have learned that McFARLAND altered his Scot trade
`statement (the "Real Scot trade Statement") to show ownership of
`a greater value of the Stock than he actually had.
`The Real
`Scot trade Statement shows that McFARLAND' s Stock is worth only
`$1,499.68.
`By contrast, the Fake Scottrade Statement purported
`to show that McFARLAND'S Stock was worth $2,565,079.18.
`
`WHEREFORE, deponent prays that an arrest warrant be
`issued for the arrest of WILLIAM McFARLAND,
`the defendant, and
`that he be arrested and imprisoned or bailed, as the case may
`be.
`
`SPECIAL AGENT
`FEDERAL BUREAU OF INVESTIGATION
`
`Swoin to before me this
`30th day of June 2017
`
`UNITED STATES MAGISTRATE JUDGE
`SOUTHERN DISTRICT OF NEW YORK
`
`7
`
`

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