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Former executives of MoviePass and its parent company have been charged with fraud, according to a federal indictment published Friday.
Theodore Farnsworth, 60, former CEO of Helios & Matheson, and Mitchell Lowe, 70, former CEO of MoviePass, were accused of misleading investors and making false statements about movie subscription service to boost the stock price of parent company Helios & Matheson Analytics.
The indictment alleges that Farnsworth and Lowe in 2017, while describing the company’s $9.95 “unlimited” movie plan as well-tested, sustainable, and profitable, is aware that MoviePass’ offer is a marketing gimmick and that its parent company does not own the technology or ability to monetize subscriber data.
The company also does not carry out the rigorous marketing checks it claims to have completed, Ministry of Justice said.
MoviePass skyrocketed to fame in 2017 for seemingly too good-to-be-true unlimited movie tickets, initially offering customers one movie ticket per day for $30 to $40. la a month. Hopefully most subscribers won’t actually use the service as often, in the same way that gyms can make up cheap monthly fees for absentee subscribers.
However, many MoviePass subscribers started using the service too often, and the company began to lose money rapidly. In an effort to maintain popularity, MoviePass has begun limiting the number of titles available among other restrictions. This service went through many price and service iterations before closing.
Without the backing of movie theaters, which had hampered MoviePass’ business model and inroads into the industry, the company was forced to dismantle in September 2019.
Co-founder Stacy Spikes regained ownership of the company in late 2021, but a new version of MoviePass has yet to officially launch. The company is currently planning beta testing in several cities including Chicago. The expectation is that the new subscription will offer three prices of $10, $20, and $30 respectively, with each tier having a certain number of credits that can be used to redeem movie tickets.
Lowe and Farnsworth don’t appear to be connected to the new version of MoviePass.
According to DOJ documents, the pair are also said to be aware that the price of the MoviePass unlimited plan won’t be enough to cover the losses. The plan was to increase new subscribers, increase shares of Helios & Matheson, and attract new investors, the indictment said.
News of the indictment comes after the Securities and Exchange Commission in September accused Lowe, Farnsworth and another former MoviePass executive, Khalid Itum, of false declaration and falsification of records.
“The indictment echoes similar allegations made by the Securities and Exchange Commission in the Commission’s recent complaint filed on September 27 against Mr Farnsworth, regarding matters that have been disclosed to the public. publicly revealed nearly three years ago and widely reported by the press,” Chris Bond said. , a Farnsworth spokesman said in a statement. “As for the SEC filing, Mr Farnsworth is confident that the facts will demonstrate that he acted in good faith and that his legal team intends to challenge the allegations in the indictment. until his vindication is achieved.”
Representatives for Lowe did not immediately respond to a request for comment.
On Friday, the Justice Department said Farnsworth and Lowe allegedly perjured that the number of tickets MoviePass subscribers purchased as part of their subscriptions had decreased over time. Instead, the pair directed staff to implement tactics to prevent subscribers from using their unlimited service, according to prosecutors.
The former CEOs were charged with one count of securities fraud and three counts of wire fraud. If convicted, each faces a maximum penalty of 20 years in prison.
