MoviePass execs misrepresented operations to draw traders, inflate inventory value, say prosectors in securities fraud case

Theodore Farnsworth, 60, of Miami, and J. Mitchell Lowe, 70, of Miami Seashore, are accused of creating false representations referring to Helios & Matheson Analytics Inc., which purchased MoviePass in 2017 and ran it till it collapsed into chapter 11 in 2020. Farnsworth is the previous chief govt officer of Helios & Matheson, whereas Lowe was MoviePass’s CEO from 2016 to 2020.

Prosecutors allege the 2 males instructed traders that MoviePass’s plan to permit subscribers to see limitless motion pictures in theaters for $9.95 had been examined, was sustainable and could be worthwhile — whereas figuring out it was merely a “short-term advertising and marketing gimmick” to realize new clients, artificially inflate the inventory value and entice traders. 

They’re additionally accused of falsely claiming that the corporate had expertise that allowed it to generate income by analyzing and monetizing the info it collected from subscribers, and made deceptive statemensts “concerning the constructive affect that a number of income streams (aside from subscription charges) had been having on MoviePass’s profitability and self-sufficiency.”

“As these prices clarify, the division, along with our legislation enforcement companions, will maintain corrupt C-Suite executives who have interaction in securities fraud accountable for his or her actions,” Assistant Lawyer Common Kenneth A. Well mannered Jr. mentioned in a press release.

The fees come a little bit greater than a month after Farnsworth and Lowe had been sued by the Securities and Trade Fee over comparable allegations. Helios and MoviePass final yr settled Federal Commerce Fee allegations that they misled clients and didn’t safe their private data. The corporate introduced plans to relaunch the service in September.

“The indictment repeats the identical allegations made by the Securities and Trade Fee within the Fee’s current grievance filed on September twenty seventh in opposition to Mr. Farnsworth, regarding issues that had been publicly disclosed almost three years in the past and broadly reported by the information media,” mentioned Chris Bond, a spokesperson for Farnsworth. “With the SEC submitting, Mr. Farnsworth is assured that the info will show that he has acted in good religion, and his authorized staff intends to contest the allegations within the indictment till his vindication is achieved.” 

William F. McGovern, a lawyer for Lowe, declined to touch upon the costs.

MoviePass grew to become wildly common when it launched the subscription plan in August 2017. By June 2018, it had reached peak membership of three million, however its guardian firm was bankrupt by January 2020 when working losses proved unsustainable.

The 2 males face so long as 20 years in jail for every cost if convicted.

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