FBI Unsealed an indictment charging two former executives at MoviePass and its parent company, Helios & Matheson Analytics Inc. (HMNY), with multiple counts of securities and wire fraud.
J. Mitchell Lowe, the CEO of MoviePass at the time, and Theodore Farnsworth, past CEO and Chairman of HMNY, allegedly connived to artificially inflate the stock price of HMNY and bring in new investors through materially false and misleading representations of the companies’ business and operations.
According to the indictment filed Friday, the executives are accused of falsely stating that MoviePass’ $9.95-per-month “unlimited”Plan was “tested, sustainable, and would be profitable or break even on subscription fees alone.”The subscription-based movie ticketing company was founded in 2011. It promised that consumers would be able to see as many movies as they wanted, without any blackout dates, by paying a monthly fee.
Fed claims Farnsworth, Lowe knew that this was all they were capable of. “a temporary marketing gimmick to grow new subscribers,”They could not keep their promise. Thus, they artificially inflated HMNY’s stock price caused MoviePass to lose money.
The indictment also alleges that the executives falsely claimed to use technologies – such as “big data” and “artificial intelligence” – that enabled them to analyze and make money off of user data collected from MoviePass. These technologies were not available to them and they did no generate revenue from user information.
Another allegation is that Lowe and Farnsworth falsely claimed that MoviePass’s “cost of goods, as reflected in the number of tickets each subscriber purchased using their subscription, was naturally declining over time consistent with their stated expectations.”MoviePass executives instructed MoviePass employees to stop subscribers from using their full potential, according to the indictment. “unlimited” plan in order to make up for the company’s losses.
Farnsworth as well Lowe are each facing a single charge of securities fraud and three charges of wire fraud. Each charge carries a maximum sentence of 20 years imprisonment.
Farnsworth and Lowe couldn’t be reached for comment.
