How the Fyre music festival turned into an epic fail

(NYTimes) - A few days after the spectacular collapse of the Fyre Festival, just as federal investigators began to circle the wreckage, the event's would-be mastermind, Billy McFarland, was still making promises.

His failed event was sold on social media by the likes of Kendall Jenner as an ultraluxurious musical getaway in the Bahamas. Scheduled for two weekends starting in late April, it was supposed to up the ante in the competitive festival market. Instead, Fyre had become a punchline for its aborted opening, with reports of panicked millennials scrounging for makeshift shelter on a dark beach.

Yet, speaking on May 2 with unnerved employees at his Tribeca office - with its US$30,000 (S$41,600) sound system and frequent fashion-model visitors - McFarland deflected blame and vowed that Fyre would survive to mount another festival next year. The coverage had been "sensationalised," he insisted, according to a recording obtained by The New York Times. (Fyre has attributed its cancellation to a combination of factors, including the weather.)

Ja Rule, the rapper and McFarland's celebrity business partner, looked on the bright side. "The whole world knows Fyre's name now," he said. "This will pass, guys." Their company, Fyre Media, however, was already facing the first of more than a dozen lawsuits seeking millions and alleging fraud, breach of contract and more.

The endeavour has also become the focus of a criminal investigation, with federal authorities looking into possible mail, wire and securities fraud, according to a source with knowledge of the matter, who was not authorised to discuss it. The investigation is being conducted by the United States attorney's office for the Southern District of New York and the FBI; it is being overseen by a prosecutor assigned to the complex frauds and cybercrime unit. (A spokesman for the U.S. attorney's office and a spokeswoman for the FBI declined to comment.)

McFarland and his lawyers declined to address specific allegations. But in a statement, he said: "I cannot emphasise enough how sorry I am that we fell short of our goal," adding, "I'm committed to, and working actively to, find a way to make this right, not just for investors but for those who planned to attend."

Stacey Richman, a lawyer for Ja Rule, said that he "would never participate in anything fraudulent; it's simply not in his DNA." But interviews with more than two dozen people associated with McFarland or the festival, many of whom requested anonymity because of pending legal issues, turned up few who were surprised by the ruins in the Bahamas and beyond.

"The lies didn't start with the Fyre Festival, let's make that clear," said Patrick McMullan, the veteran party photographer who came to regret his trust in McFarland's business savvy.

Raised in Short Hills, New Jersey, by real estate developer parents, McFarland was already starting technology companies as a teenager. With the creation of Magnises in 2013, he took on the profile of a budding New York entrepreneur, with bottle service tastes.

Modelled after the American Express black card, Magnises - "Latin for absolutely nothing," McFarland once said - was a membership club for upwardly mobile millennials, offering discounts at select hot spots and access to a West Village town house.

But as Magnises expanded, members complained that offers, like Beyoncé tickets, never materialised, and that annual dues were charged to their credit cards months early.

McFarland also looked for money on the side. Molly Krause, a publicist who briefly joined Magnises, described McFarland's mass text messages offering deals on hoverboards and weekend rentals of his Maserati.

"Ja Rule is working on a new song and can mention your name, nickname, company name, etc in the upcoming hit single for $450," McFarland texted last year. "5 Spots. LMK!" Still, he had a way of engendering trust.

McMullan said that he paid McFarland almost US$100,000 for a website, which was never delivered. "I was told he had made this big company, he had made millions of dollars," McMullan said. "I thought he was smarter than he was." Stars and Investors Needed Early in 2016, McFarland became consumed with a new endeavour: Fyre Media.

With it, he hoped to build an app that would allow individuals to bid for celebrity appearances at their events.

McFarland hired developers in Portland, Oregon, and used a roster of the famous and semifamous (Iggy Azalea! Soulja Boy!) to woo investors, including Carola Jain, married to Bob Jain, a prominent hedge fund executive. (Carola Jain has been named as a defendant in at least one Fyre lawsuit. Through a spokeswoman, she declined to comment.) In his bid for moguldom, however, McFarland had little regard for traditional business practices. According to four Fyre Media employees, who requested anonymity because of the continuing fallout, there was no paperwork upon their hiring, and the payroll system was ad hoc at best - employees were typically paid via wire transfer, and sometimes in cash, receiving no pay stubs.

McFarland is now accused of more than sloppy bookkeeping. Some investors believe that his company was overstating its financial position. In January, Fyre Media said in company documents that it owned land in the Bahamas worth US$8.4 million and had US$21.6 million in revenue from December alone - claims that one investor, Oleg Itkin, said in a lawsuit were probably fictitious.

Toward the end of last year, with Fyre Media still in its early stages, McFarland became increasingly distracted by yet another project. A music festival in the Bahamas would combine what he called his three biggest passions - tech, rap music and the ocean - and publicise the app, he told his staff.

McFarland knew how to promote it. He and Ja Rule enlisted influencers (called Fyre Starters) like Jenner, Emily Ratajkowski and Bella Hadid to post about the festival on Instagram, and he pursued deals with SiriusXM and a yacht startup called YachtLife.

As advertised, Fyre Festival would be a site of fantastical opulence, featuring acts like G.O.O.D. Music, Major Lazer and Migos.

Well into March, the event's website - which briefly vanished because its designer had not been paid - claimed it would take place on Fyre Cay, a private island that once belonged to the drug lord Pablo Escobar. Ticket packages included the US$400,000 "Artist's Palace," with four beds, eight VIP tickets and dinner with one festival performer.

But there was no such island or palace. Fyre employees recalled higher-ups inventing extravagant accommodations just to see if people would buy them - and some did, they said.

McFarland had been scouting sites, taking private planes to the Bahamas with his Fyre entourage and models in tow. But long after tickets had been sold, he was still nailing down a location.

By early April, the festival team finally set up at Roker Point, a largely unbuilt housing development on Great Exuma that borders a Sandals resort.

The festival hired a series of experienced producers, cycling through them quickly. With guests set to arrive on April 27, the team had a long way to go to deliver the vision that McFarland had sold.

McFarland and his executive team lived near the site in a resort villa, riding ATVs around to check the progress. Organisers found enthusiastic partners in Bahamian workers, who hoped for a long-term economic boost.

Still, residents who had seen Fyre's ostentatious marketing pitch worried about its distance from reality. "Something like this, it could build Exuma and it could break Exuma," said Ian Nicholson, a carpenter working for the festival.

About three weeks out, Richard Hooban, a Brooklyn DJ booker, toured the site. He saw a craggy beach and a gravel-strewn plot where the main stage would be. "This is going to take a lot of money or time to transform," he recalled thinking.

Weeks before the festival, Fyre informed ticket holders that the event would be "cashless (and cardless)," and encouraged attendees to put up to $1,500 in advance on a digital Fyre Band to cover incidentals, according to one lawsuit.

Those wristbands were merely a stopgap solution to help the company's cash flow, according to two employees with knowledge of the accounts. They said that the Fyre Bands took in nearly $2 million; some of that money, according to another lawsuit, went to pay back part of a recent $3 million loan.

Expenses were swelling: Bed frames and beach chairs were rush-ordered; beach umbrellas had to be flown in, rather than shipped, because of late payments, according to three production staff members. Essential production tools, like walkie-talkies, never even arrived.

Back at Fyre Media, the company credit cards were being declined for everyday office purchases.

Warnings to McFarland and his team came from seemingly every corner. Two days before guest arrival, McFarland asked Nicholson, the carpenter, who was working 18-hour days, how it was going. "I said, 'I don't think it's gonna be ready,'" Nicholson recalled.

Senior staff members pleaded with McFarland to cancel or postpone, several of those present said. But having just taken out yet another loan for US$200,000, according to a lawsuit, he responded that money can solve everything, one employee recalled.

Then a storm hit.

On the morning of Thursday, April 27, facing piles of soggy bedding, unfinished tents and understocked bars, festival staff members again begged McFarland and his team to cancel. Again, he did not budge - even with the convenient excuse of bad weather.

At the festival site, guests lined up to be checked into their damp tents. The crowds bottlenecked and grew restless. McFarland and his executive team, including Jain, the investor, holed up in their headquarters, known as the blue house.

Finally, McFarland stepped outside. He hopped on a makeshift table and tried to calm the masses. Just grab a tent, they were instructed, which created more chaos as people scrambled for dry - or any - form of shelter.

In the face of angry customers, McFarland retreated.

He appeared "dumbfounded," Sabatini said, "and completely at a loss." Trash and Unpaid Bills As late as that Thursday evening, McFarland and Ja Rule had continued to assure talent agents that all systems were go. But by Friday morning, both weekends of the festival had been cancelled.

Within a few days, McFarland and the rest of his executive team had left the island, their site strewn with mattresses, empty Champagne bottles and other detritus.

Several businesses are still anxiously awaiting the fate of their gear, which the Bahamian government is holding because Fyre owes more than US$330,000 in customs fees, according to a government document.

Sabatini said that his Miami-based company was out about US$10 million worth of equipment. Without a speedy resolution his business "would start facing irreparable consequences," he said.

Workers like Nicholson, the carpenter, were left unpaid. A father of three, he is owed nearly US$5,000, and his lights and water have been turned off because he couldn't pay the bills. "It's killing me," he said.

Back in New York, at the early May meeting, rattled employees pressed McFarland and Ja Rule on a troubling thought: They had committed fraud.

"That's not fraud, that's not fraud," Ja Rule said, according to the recording. "False advertising, maybe - not fraud." McFarland stayed silent.