Former executives were responsible for MoviePassThey were indicted for what the Justice Department called “a scheme defrauding investors.” J. Mitchell Lowe (ex-MoviePass CEO) and Theodore Farnsworth were indicted in “a scheme to defraud investment”. Farnsworth was the former chairman of Matheson Analytics (HMNY), and Helios, the service’s parent company. Charged withOne count of securities fraud, and three of wire fraud. Federal authorities accuse them in making materially false or misleading claims about MoviePass’ business in press releases and interviews, as well as SEC filings. This was done to artificially increase HMNY’s stock and attract new investors.
According to newly unsealed court documents Farnsworth & Lowe allegedly knew right from the start that the $9.95 “unlimited” plan was a temporary gimmick in order to attract new subscribers. It also artificially inflated HMNY’s stock price. The feds also claimed that they falsely claimed that the business model was sustainable and that it was profitable with subscription fees alone.
Additionally, executives claimed that HMNY was equipped with AI and big data technologies that could be used for revenue generation. This included data from MoviePass subscribers. They are accused of making this claim despite knowing that HMNY does not have the technology and the ability to monetize subscribers’ data.
Another charge against the executives was that they had falsely claimed that MoviePass was making a lot of money from multiple revenue streams. Authorities claim that the business did not have any other revenue streams that would enable it to self-sufficiency or offset its losses. Farnsworth, Lowe and others were also accused of using various tactics to stop certain subscribers from accessing their “unlimited” service. MoviePass was, as you may recall, a subscription service that allowed unlimited movie viewing. FTC to settle in 2021It was accused of infringing subscriber passwords to provide sufficient grounds to freeze accounts of frequent users.
In a statement The VergeFarnsworth spokesperson stated that Farnsworth had made the following statements: “The indictment reiterates the same allegations made against Mr. Farnsworth by the Securities and Exchange Commission (Commission’s recent complaint filed September 27th) concerning matters that were widely reported by the news media and publicly disclosed nearly three-years ago. He is certain that the facts will show that he acted with good faith as he did in the SEC filing. His legal team is going to contest the allegations until Farnsworth’s vindication.
The SEC sued MoviePassThe company’s executives were also charged with fraud in September. They also claimed that they misled investors about the viability and viability of its $9.95-per month business model. Despite the turbulent past and the many accusations that the ex-leaders still face, the company is strong. MoviePass is back. After HMNY filed for bankruptcy, Stacy Spikes, the original co-founder of the service, bought it back. The service was relaunched on September 5th. Subscribers pay $10 per month to view up to three movies, $20 per monthly for four, and $30 for up to five movies per month.
Farnsworth & Lowe are now facing a maximum sentence of 20 years imprisonment for each count of wire and securities fraud.
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