Billy McFarland promised aspirational millennials a life changing music festival on the beach in the Bahamas. He teamed up with rapper Ja Rule and set out to fund and promote his big idea. We all know what happened next. Festival goers who paid thousands – $4,000 to $250,000 for a group VIP experience – were left stranded with FEMA tents as accommodations, cheese sandwiches in Styrofoam containers, no water, and a festival site rife with thieves, feral dogs, and violence. To add insult to injury, all the bands scheduled to appear bailed out before the festival started.
When everyone was safely back home, McFarland began to be hit with lawsuits. Then, on June 30th, he was arrested and charged with wire fraud. He allegedly showed Fyre Festival investors forged documents showing he had $2.5 million worth of investments. In reality, he had just $1,500. He was released on $300,000 bail and is awaiting the July 31 preliminary trial for his crimes. He is facing up to 25 years in prison if convicted.
Throughout this whole debacle, many people have wondered where all the money McFarland raised went. How did this young man who dropped out of college during his freshman year scam so many out of so much? So we did a little digging. It turns out, this is not the first time the 25-year-old entrepreneur from Short Hills, New Jersey led a shady operation that screwed people out of money.
McFarland dropped out of college his freshman year to found Spling, a social networking site based on sharing links with your friends which were then forwarded to Facebook and Twitter. Somehow this unnecessary company managed to secure $400,000 in Series A funding.
Next, McFarland launched Magnises. This company started out as a luxury credit card – or, more accurately, the appearance of a luxury credit card. Magnises was marketed toward millennials who wanted the experience of an American Express Black Card before they had the income to qualify for one. Magnises copied the information from a customer’s standard Chase credit card and transferred that info onto a heavy, black Magnises card that came with perks, but no credit line. Magnises was referral only, giving members the feeling of exclusivity.
Eventually, McFarland scrapped the card and turned Magnises into an app called Magnises Now, combining the social networking aspect of Spling and the perks of the Magnises card. Members of Magnises could party at New York’s Magnises club, get recommendations, and buy tickets to Broadway shows. Of course anyone can get recommendations and reviews of businesses on Yelp and buy tickets on Ticketmaster. McFarland was never selling an actual product, just repackaging existing ideas and acting as the middle man. Magnises had a $250 annual fee. The company charged its 40,000 clients a premium for services they could get elsewhere for free.
Magnises failed to deliver on its promises regularly. Many Magnises members reported that their experiences were anything but luxury. One person bought tickets for a Broadway show that had to be rescheduled a number of times. On the day of the show, the tickets had not yet arrived. They weren’t at will call either. They had to be hand delivered to the customer at a restaurant just before the show.
Magnises currently has a one-and-a-half star review on Yelp. Reviewers recount how Magnises led them on, let them down, and failed to deliver.
McFarland’s career, up to launching the Fyre Festival, was based on broken promises and services that were never delivered. And yet, investors threw millions at the 25-year-old to put on a luxury music festival.
Of course, we all know how that turned out.