Former MoviePass CEOs Indicted On Fraud Charges

By Spencer Perry

The saga of MoviePass still isn't over as two former executives at the company have been indicted on securities fraud charges by the Department of Justice. The indictment was unsealed today revealed that Theodore Farnsworth, the former chairman of Helios & Matheson Analytics Inc.(MoviePass' former parent company), and J. Mitchell Lowe, former CEO of MoviePass, are being charged after "allegedly engaged in a scheme to defraud investors through materially false and misleading representations relating to HMNY and MoviePass's business and operations." In a statement, Assistant Attorney General Kenneth A. Polite, Jr. said: "The Department, together with our law enforcement partners, will hold corrupt C-Suite executives who engage in securities fraud accountable for their actions."

"As alleged, the defendants deliberately and publicly engaged in a fraudulent scheme designed to falsely bolster their company's stock price," added  Assistant Director in Charge Michael J. Driscoll of the FBI New York Field Office. "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."

According to a DOJ press release on the charges, Farnsworth and Lowe falsely claimed that the previously used "unlimited plan" from MoviePass, that used to cost less than $10 a month, had been "tested, sustainable, and would be profitable or break even on subscription fees." It continues that the pair were aware this gimmick, which became the main selling point for MoviePass on the whole, was not sustainable and "was a temporary marketing gimmick to grow new subscribers." 

The pair also allegedly made claims they were able to "generate revenue by analyzing and monetizing the data MoviePass collected from subscribers," with the indictment revealing that they possessed no capabilities to carry out such claims. 

Perhaps to cap it all off, and to make many former MoviePass subscribers shout out "I KNEW IT!," the DOJ indictment reveals that the pair allegedly had MoviePass employees "implement numerous tactics to prevent certain subscribers from using the purportedly 'unlimited' service for which they had paid to try to ease MoviePass's cash shortfalls." Both Farnsworth and Lowe are being charged with with one count of securities fraud and three counts of wire fraud, which could face a penalty of 20 years in prison per count. 

MoviePass has since been purchased by cofounder Stacy Spikes, who was granted ownership of the company after the brand had ceased operations in 2020, with plans for a relaunch of the service previously announced. 

(Cover photo by Andrew Harrer/Bloomberg via Getty Images)

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