Billy McFarland, the promoter behind last year’s disastrous Fyre Festival, accepted a $26 million forfeiture as part of his plea deal for defrauding investors, and he faces as much as 40 years in prison. But in reality, those numbers are almost as inflated as his promises about the festival.
There’s little likelihood that the injured parties from the Fyre debacle will see much, if any, of that money. And McFarland’s lawyers bartered for a recommended 8-10 year sentence as part of his guilty plea to two counts of wire fraud in federal court on March 6 — although ultimately the term is up to U.S. judge for the Southern District of New York Naomi Reice Buchwald, who sources tell Variety may decide to go light in an effort to get him back in a position to be earning money.
But what chance does the disgraced 26-year-old would-be entrepreneur have for financial rehabilitation? The Fyre Festival has become a metaphor for almost comically inept planning. The heavily hyped event was to be a “luxury concert” — taking place on a small island in the Bahamas and featuring Blink-182, Migos and Disclosure — that collapsed on in a mess of disorganization on April 29 before it had even started. Far from the luxury accommodations and celebrity-chef-prepared meals promised by its producers — McFarland and rapper Ja Rule — concertgoers were met with flimsy tents, boxed lunches, near-total disorganization and long waits for flights to return to the mainland after airlines began refusing to fly would-be concertgoers to the overcrowded island of Exumas. One production professional briefly associated with the festival told Variety the event was marked by “incompetence on an almost inconceivable scale.”
While it’s possible some money could be raised by a documentary film (“Bonfyre of the Vanities”?) or a “my story” memoir McFarland could write while behind bars, there’s little chance they would raise even a fraction of the forfeiture obligation.
On top of that, any money recovered goes first to Uncle Sam. “Under federal law, forfeiture funds go to the government — it isn’t restitution,” white-collar criminal defense attorney Alan Ellis tells Variety. And although the Department of Justice’s “Guidelines on Seized and Forefeited Property” includes secured creditors as priority third-party beneficiaries (followed by employees on active payroll, then vendors), these are preceded by a long list of government uses for the funds — foremost being compensation to the investigative units and enforcement branches that brought the offender to justice.
All of which means that the ticket purchasers who have filed class-action lawsuits — who do not fall into any of the above-described categories — are unlikely to be the beneficiaries of forfeiture funds, except possibly as part of ticketing firm Vendor-1’s $2 million claim, which merited a fraud count all its own (though many customers purchased directly through Fyre Festival LLC).
“Going forward, this judgment will haunt Mr. McFarland for at least 20 years,” says Loyola Law School professor Dan Schechter, explaining that the initial forfeiture judgment runs for 10 years and is renewable for an additional 10 (in other words, he’ll be paying it off for 20 years). “But there’s not a lot that can be done. It’s not a typical situation where a business can be rehabilitated; his company was basically a Ponzi scheme used to defraud people. The forfeiture orders him to turn over the money, and I’m sure to the extent that he can, he will. But the problem is he’s probably spent it and doesn’t have to give back, and he isn’t in a position to earn it back.”
McFarland and his legal team, led by Boies Schiller & Flexner’s Randall Jackson, a former assistant U.S. attorney, have managed to keep financial documents shared in the criminal investigation under seal even as the would-be festival mogul has cultivated an image of destitution. Which leaves many wondering, “Where did the money go?”
McFarland collected tens of millions from wealthy stakeholders, largely by falsifying bank records and stock certificates in order to appear successful, according to government charges. Yet he had trouble hiring a criminal defense attorney (appearing with a public defender at one hearing) and has yet to respond to the dozens of civil lawsuits that have piled up, resulting in defaults that mean certain victory for his pursuers. But how much does any of it matter if he’s unlikely to be able to repay?
While the company’s financials will surely be made public as part of the involuntary Chapter 7 bankruptcy against Fyre Festival LLC initiated in July, those proceedings were put on hold until the criminal investigation concludes. The class-action suits, too, are marching along. Geragos & Geragos attorney Ben Meiselas is looking past McFarland’s turned-out pockets. “The law imposes a duty not to aid or abet others in the commission of criminal conduct. Those who aided and abetted this fraudulent enterprise will be financially liable to victims, as we predicted from the outset,” he tells Variety, referencing some of Fyre’s investors.
The most high-profile of those is McFarland’s business partner, Jeffrey Atkins — a.k.a. Ja Rule. New York attorney Stacey Richman, who is representing Atkins in the civil suits (he has not been charged criminally), says some of those cases have fallen away with the realization that McFarland is broke. “My client would like to believe the best about Mr. McFarland, and does not think he would do this intentionally but that he got in too deep,” Richman tells Variety. “He is having a hard time wrapping his head around any other possibility and is beyond disappointed.”
And while headlines roared that McFarland was looking at a possible 40 years in prison — via two fraud counts each carrying a maximum sentence of 20 years — it is unlikely he will get anything close to that; the 8-10 years prosecutors and defense attorneys agreed upon as part of his plea deal amount to a recommendation. Sentencing, which occurs June 21, will be at the discretion of Judge Buchwald.
“I don’t expect him to get a particularly harsh sentence if it’s just the two counts of fraud,” Loyola criminal law professor Laurie Levenson tells Variety, noting that youth and inexperience should work in McFarland’s favor. “He was, what, 24 or 25 when he committed these crimes? That’s practically a kid.”
Ellis says McFarland and his legal team were smart to take the plea, because by the time a case progresses to an indictment the government is confident it has assembled enough evidence to win. “In federal court, 97% of those charged plead guilty,” he says. “Of the three percent that go to trial, the government wins anywhere from two-thirds to three-quarters of the cases. So if you’re indicted by the feds, you have a 99% chance of winding up in front of a sentencing judge, and an 86% chance of going to prison.”
Even “Pharma Bro” Martin Shkreli, who went to trial and was sentenced this month for securities fraud, only received seven years when the guidelines suggested a minimum of 15. It’s even possible that a Pharma-Fyre meeting could take place at one of the East Coast’s minimum security “prison camps,” which include a facility in Canaan, Pennsylvania (which Shkreli has requested) and the dorm-like institution in Otisville, New York, where inmates can qualify for weekend leave. With good behavior, McFarland can have 15 percent of his sentence shaved off.
What will help his case? When it comes to sentencing, “the name of the game these days is humanizing your client,” says Ellis. “If he donated to the Make a Wish Foundation, that’s great, but if he shoveled snow for his elderly neighbor, that’s even better.” Between now and the sentencing hearing, Jackson and second chair Karen Chesley will be working up a portrait of McFarland as a wayward and over-ambitious young man and assembling a list of mitigating factors. Schechter framed the main question the judge will be asking as she decides his fate: “Is he a good person who made a mistake — or a bad person who got caught?”