Two former leaders of MoviePass have been indicted on securities fraud charges for allegedly deceiving investors about the company’s business model and sustainability.
Theodore Farnsworth, the former CEO of parent company Helios & Matheson, and Mitchell Lowe, the former CEO of MoviePass, were each charged with one count of securities fraud and three counts of wire fraud.
MoviePass saw a surge in popularity after it launched its all-you’ll-watch subscription plan for $9.95 per month. The service quickly grew from 20,000 members to more than 3 million — but hemorrhaged money and eventually collapsed.
The charges, which were Friday’s unsealedThese allegations echo those made by the Securities and Exchange Commission in civil complaint filed on Sept. 27, 2009.
Both cases allege Lowe and Farnsworth falsely claimed they had market tested their subscription model and that it would sustain them over time.
They also claimed falsely to be using the indictment “big data”And “artificial intelligence”they used subscriber information to monetize it. They also falsely claimed they were developing multiple revenue streams, and that their costs were falling. The government claims that they tried to prevent subscribers from using the service to stop the bleeding.
In a statement Friday, the FBI called their assertions an “anachronism”. “attempted scam”Designed to support stock prices.
“Attempted scams of this nature erode the public’s faith in our financial markets,” said Michael J. Driscoll, the assistant director of the FBI’s New York field office. “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.”
Farnsworth’s spokesman, Chris Bond, said that Farnsworth acted in good faith and would fight the charges.
“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,”Bond. “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.”
Lowe has published a memoir about the business career he had, including stints at Redbox (now Netflix) and Netflix.
MoviePass recently announced that it would relaunch its site with a new business plan and new ownership.