Tag: moviepass
Former MoviePass executives indicted for fraud, “attempted scam”
MoviePass may be relaunching, but former CEOs of the movie subscription service are still embroiled in scandal.
As reported by Variety, the former CEO of MoviePass’s parent company Helios & Matheson Analytics Inc., and the former CEO of MoviePass Mitchell Lowe have each been charged with four counts of fraud: one count of securities fraud, and three counts of wire fraud. If convicted, they each face a maximum of 20 years in prison for each count.
The Department of Justice unsealed the charges on Friday, November 4, a little over a month after the Securities and Exchange Commission filed charges against Farnsworth and Lowe for fraudulent behavior.
Both the DOJ and the SEC allege that Farnsworth and Lowe claimed that MoviePass’s “unlimited” plan, where customers could pay $9.95 a month to see unlimited movies in theaters, had been market tested and proven to be sustainable. The model turned out to be anything but, with MoviePass losing money, allegedly trying to prevent customers from seeing movies, and ultimately shutting down in 2019.
The DOJ alleges that Farnsworth and Lowe made these false claims in order to bolster the stock price of Helios & Matheson and attract more investors, knowing full well that the $9.95 unlimited plan was a “marketing gimmick.” Farnsworth and Lowe also allegedly made fraudulent statements about using “big data” and “artificial intelligence” to monetize subscriber data without actually having access to or using these technologies.
The FBI New York Field Office is investigating the case. Said Assistant Director in Charge Michael J. Driscoll: “attempted scams of this nature erode the public’s faith in our financial markets. The FBI is committed to ensuring these types of frauds and swindles are uncovered and the perpetrators are held responsible for their actions in the criminal justice system.”
Chris Bond, a spokesman for Farnsworth, said in a statement that Farnsworth would be fighting the charges. “As with the SEC filing, Mr. Farnsworth is confident that the facts will demonstrate that he has acted in good faith, and his legal team intends to contest the allegations in the indictment until his vindication is achieved,” said Bond.
As of now, Farnsworth and Lowe do not seem to be part of the new, yet-to-be-officially launched version of MoviePass.
Feds charge former MoviePass execs with securities and wire fraud
The former executives in charge of MoviePass have been indicted in what the Justice Department calls “a scheme to defraud investors.” Ex-MoviePass CEO J. Mitchell Lowe and Theodore Farnsworth, who used to be the chairman of the service’s former parent company Helios and Matheson Analytics (HMNY), have been charged with one count of securities fraud and three counts of wire fraud. Federal authorities accuse them of making materially false and misleading claims regarding MoviePass’ business in press releases, interviews and even SEC filings in a bid to artificially inflate HMNY’s stocks and entice new investors.
According to the newly unsealed court documents, Farnsworth and Lowe allegedly knew from the start that the business’ $9.95 “unlimited” plan was a temporary gimmick to attract new subscribers and, hence, artificially inflate HMNY’s stock prices. They also falsely claimed that the business model was tested to be sustainable and that it was possible to become profitable on subscription fees alone, the feds said.
In addition, the executives allegedly claimed that HMNY had “big data” and AI technologies that could be used to generate revenue for the company by analyzing data collected from MoviePass subscribers. The indictment accuses them of making the claim even though they knew that HMNY did not have the technology or the capability to monetize subscriber data.
Another allegation against the executives is that they’d made false representations that MoviePass was earning considerable money from multiple revenue streams. The business did not have a non-subscription revenue stream that would make it self-sufficient or offset its losses, according to authorities. Farnsworth and Lowe were also accused of implementing various tactics to prevent certain subscribers from being able to use their “unlimited” service. If you’ll recall, MoviePass had to settle with the FTC in 2021 over allegations that it invalidated subscriber passwords on purpose to give it sufficient reason to freeze accounts of frequent users.
In a statement made to The Verge, the spokesperson for Farnsworth said: “The indictment repeats the same allegations made by the Securities and Exchange Commission in the Commission’s recent complaint filed on September 27th against Mr. Farnsworth, concerning matters that were publicly disclosed nearly three years ago and widely reported by the news media. As with the SEC filing, Mr. Farnsworth is confident that the facts will demonstrate that he has acted in good faith, and his legal team intends to contest the allegations in the indictment until his vindication is achieved.”
The SEC sued MoviePass for fraud back in September and also accused the executives of misleading investors about the viability of the company’s $9.95-per-month business model. Despite its tumultuous past and all the accusations the former people in charge still have to face, MoviePass is back. Stacy Spikes, its original co-founder, purchased it back after HMNY filed for bankruptcy. The service relaunched in September 5th and now charges subscribers $10 a month for up to three movies, $20 a month for up to four and $30 for a maximum of five movies a month.
As for Farnsworth and Lowe, they’re now facing a maximum penalty of 20 years in prison for each count of securities and wire fraud.
Former MoviePass Execs Charged in Alleged Fraud Scheme to Boost Stocks – CNET
The execs behind the MoviePass debacle are now facing criminal charges
Mitch Lowe and Ted Farnsworth already settled with the FTC over fraudulent activity affecting MoviePass customers, and are being sued by the SEC, but now the former heads of MoviePass and its parent company, Helios and Matheson Analytics (HMNY), are facing criminal allegations of securities fraud and wire fraud.
The Department of Justice announced the charges today, saying false statements made by both men defrauded investors in HMNY when the execs pretended like the company’s money-losing $9.95 “unlimited” moviegoing plan had any hope of profitability.
Chris Bond, a spokesperson for Farnsworth, said in a statement emailed to The Verge that “The indictment repeats the same allegations made by the Securities and Exchange Commission in…
Financial Crime: Former MoviePass execs charged with securities fraud as prosecutors allege duo lied to investors, knew ticket scheme was a gimmick
SEC sues former MoviePass executives for fraud
The US Securities and Exchange Commission has filed a lawsuit against two former MoviePass executives. In a federal complaint seen by Bloomberg, the agency accused Theodore Farnsworth and Mitch Lowe on Monday of misleading investors about the viability of the company’s $9.95 per month business model.
Farnsworth was the chief executive officer of Helios and Matheson Analytics, the parent company of MoviePass between 2017 and 2020. Lowe led MoviePass between 2016 and its collapse in 2020. The SEC alleges Farnsworth and Lowe “intentionally” and “repeatedly” shared false information.
“Faced with debilitating negative cash flows – rather than tell the public the truth – Farnsworth and Lowe devised fraudulent tactics to prevent MoviePass’s heavy users from using the service, and falsely and misleadingly informed the public that usage had declined naturally or due to measures the company had employed to combat subscribers’ purported violations of MoviePass’s terms and conditions of service,” the complaint states.
In addition to financial penalties, the SEC is seeking to prevent both Farnsworth and Lowe from serving in director or officer positions in any company that’s required to register securities with the agency. The SEC’s lawsuit also names former MoviePass business development executive Khalid Itum as a defendant. Itum allegedly pocketed $310,000 by submitting false invoices to the company. Last year, Helios and Matheson, Farnsworth and Lowe settled a lawsuit from the Federal Trade Commission related to allegations they mislead customers and failed to protect user personal information.
“The complaint concerns matters subject to an investigation that the company and other news outlets publicly disclosed nearly three years ago, and Mr. Farnsworth’s legal team will maintain the challenge to this complaint,” Chris Bond, a spokesperson for Ted Farnsworth told Bloomberg. “Mr. Farnsworth continues to maintain that he has always acted in good faith in the best interests of his companies and shareholders.”
The suit comes as a new version of MoviePass attempts to reestablish itself under the leadership of cofounder Stacy Spikes. The company recently launched a beta service in Chicago, Dallas and Kansas City, offering packages that start at $10 per month.
Former MoviePass execs are being sued by the SEC for lying to customers
Ahead of the official relaunch of subscription-based movie ticketing service MoviePass, the Securities and Exchange Commission (SEC) filed a complaint against three of its former executives, claiming they lied to investors and the public. The SEC filing targeted former MoviePass CEO Mitch Lowe and Ted Farnsworth, the former CEO of parent company Helios and Matheson […]
Former MoviePass execs are being sued by the SEC for lying to customers by Lauren Forristal originally published on TechCrunch