Financial Lessons From the Fyre Festival Lawsuit
By now you’ve likely heard about the Fyre Festival, the failed fraud of a festival that ended in logistical chaos and bankruptcy filings by its founders. But before the documentaries by Netflix and Hulu, it was difficult for those in the general public to suspect anything was amiss — that Fyre was anything but an incredible weekend in the Bahamas, rife with exciting activities and live music performances.
Kendall Jenner promoted it. Model Bella Hadid was scheduled to attend. So in early 2017, a starstruck Matthew Herlihy bought a package to the Fyre Festival for $1,027. After all, A-list musical acts such as Major Lazer and Migos were scheduled to perform in a luxurious, private-island setting.
The price Herlihy paid was supposed to include round-trip airfare to the Caribbean island from Miami, luxury accommodations, gourmet food, and access to a number of activities, including musical performances and yoga sessions.
But when Herlihy arrived on the island, he saw total chaos. “None of the musical performances or activities were available,” Herlihy said in a claim filed in federal court on May 3, 2017.
“There were no communal bathrooms or showers. Instead, there was a Porta-Potty stationed every 200 yards.”
Not exactly luxury accommodations. The food was unappetizing, and there were no on-site medical services, according to the New York City native.
“There were no basic amenities like soap, sunscreen, and shampoo, and no electricity,” says Herlihy, who arrived on Thursday night and departed the next day after the festival was canceled.
A Fyre Festival Lawsuit
Herlihy subsequently named Fyre Festival founders William McFarland and Jeffrey Atkins — known by his stage name Ja Rule — as defendants in a class-action lawsuit for violating state consumer laws, negligence, fraud, and misrepresentation.
“[Herlihy] had to spend the weekend in Miami, where he had to incur additional expenses on food, which were supposed to be covered by the ticket package,” his attorney, Andrea Clisura, wrote in the lawsuit.
“He had also deposited $900 onto a wristband that was supposed to be used to pay for activities and beverages on the island during the festival,” she continued, “and he did not have access to such monies after he left the island. Plaintiff Herlihy regrets buying a ticket package to the Fyre Festival.”
Fraud and False Representation
Twenty-six-year-old BillyMcFarland founded Fyre Media in 2016 to build a digital application that would allow individuals organizing commercial events, such as concerts, to bid for artist and celebrity bookings, according to a statement by the Department of Justice.
But when Anthony Lauriello arrived at Fyre Festival, he saw mayhem and had an experience similar to Herlihy’s.
However, unlike Herlihy, Lauriello was also robbed of his headphones, jeans, and sneakers because the defendants allegedly failed to provide any security or fiscal recourse.
“Defendants had instructed attendees to upload funds to a cashless wristband, dubbed a ‘FyreBand’ for use at the Fyre Festival rather than bringing any cash,” the class action complaint states. “As such, attendees were generally unable to purchase basic transportation on local taxis or buses. As a result, Plaintiffs were not only misled and defrauded by the Defendants’ false representations of the Fyre Festival, but also were stuck on an island to fend for themselves.”
Both Herlihy and Lauriello were promised a refund for the ticket package of $1,027 that they paid. However, no money has been forthcoming to date, according to court records.
“Defendants promoted Fyre Festival as a packaged musical festival on two consecutive weekends on the remote island of Exumas, located in the Bahamas,” Herlihy and Lauriello’s joint complaint states. “Instead, ticket holders showed up to an unplanned, unorganized, disaster-stricken area that was far from the reality that Defendants promised in their promotional advertising of the event.”
Ever wonder how much social media influencers can earn to promote events ranging from the Fyre Festival to the latest in makeup and fashion? Here’s a list of the average price per post on Instagram for various categories, according to Influence.co:
- Modeling: $434
- Photography: $385
- Food: $326
- Pets: $320
- Fitness: $306
- Fashion/Design: $217
- Beauty: $205
- Music: $201
- Lifestyle: $172
More Than One Fyre Festival Lawsuit
Herlihy and Lauriello’s lawsuit is among a slew filed by vendors, attendees, and investors that are unlikely to result in payouts due to parallel proceedings involving criminal charges of wire fraud across state lines.
“Unlike theft, fraud generally doesn’t involve taking something through stealth or force,” says Taso Pardalis, an attorney and partner at the Pardalis & Nohavicka law firm in New York City. “Fraud includes knowing and willful misrepresentation of fact. Fraud generally involves some form of deceit or even abuse by a person in a position of trust.”
On June 18, 2018, McFarland was charged in two separate fraud schemes before Judge Naomi Reice Buchwald in U.S. District Court.
“William McFarland tendered fake documents to induce investors and a ticket vendor to put more than $26 million into his company and the disastrous Fyre Festival,” said U.S. Attorney Geoffrey S. Berman prior to McFarland’s sentencing.
While the announcement of McFarland’s punishment was initially adjourned until July 26, he was sentenced at last on October 11, 2018, to six years in a federal correctional institution for “multiple fraudulent schemes and making false statements to a federal law enforcement agent.”
“Like a gambler who cannot stop playing blackjack even though he’s losing, McFarland has proven that he is unable to be truthful and to not hurt people,” says Jonathan Mandel, a criminal defense attorney in Los Angeles.
While McFarland cools his heels in federal custody, his partner Ja Rule now faces the music in bankruptcy court, where investors, including John Nemeth, Raul Jimenez, and Andrew Newman, forced the pair into bankruptcy with an involuntary Chapter 7 petition on July 7, 2017.
Falling for the Fyre Festival Fraud
So where did Herlihy, Lauriello, and others go wrong in falling for such a scam? According to Pardalis, a con like the Fyre Festival can be difficult to spot before it’s too late.
“Financial fraudsters use sophisticated schemes to get their victims to part with their money,” Pardalis says. “But there is legal recourse to restore yourself to whole if defrauded. An act of fraud may be prosecuted as criminal if brought by prosecutors and also as a civil action by the victim or victims of the misrepresentation. The two are not mutually exclusive and may proceed simultaneously.”
There are certain steps, however, that Pardalis recommends for consumers to protect themselves from a scam:
- Verify credentials.
- Don’t fall for an impressive title or celebrity name-dropping.
- Do your due diligence to ensure that the savvy, smooth-talking person on the other end of the transaction is really who he or she claims to be.
- Always be initially skeptical of a too-good-to-be-true deal with guaranteed results.
Be wary if you’re being pressured to respond quickly. Although the opportunity may turn out to be legitimate, consider this a red flag.
Additional reporting by Connor Beckett McInerney.