Ex-MoviePass executives face fraud charges | CNN Business

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The former CEO of MoviePass and the leader of its former parent company have been indicted on securities fraud charges for deceiving investors about the sustainability and profitability of the company’s movie-a-day subscription model, according to a Justice Department release Friday.

J Mitchell Lowe, the former CEO of the movie ticket subscription service, and Theodore Farnsworth, the former head of the parent company of the now-defunct Helios and Matheson Analytics, Inc. (HMNY (HMNY)), allegedly plotted to defraud MoviePass investors by producing “physically” according to To state, false and misleading perceptions of business activities to boost share prices and attract investors.

“It is alleged, the defendants deliberately and publicly engaged in a fraudulent scheme designed to wrongly boost their company’s stock price,” Assistant Director in Charge Michael J. Driscoll of the FBI in New York said in the statement. The men each face one count of securities fraud and three counts of electronic fraud, with a maximum of 20 years in prison. Farnsworth made his first appearance in DC County court Friday after voluntarily surrendering.

Lowe and Farnsworth are accused of lying about an “unlimited” subscription plan that gave customers the opportunity to watch any number of movies in theaters for a flat monthly fee of $9.95, telling investors that the system was tested and sustainable and capable of stimulating profits or at least breakeven. Court documents claim that the two men knew the allegations were false and used the plan to increase subscriber numbers and inflate HMNY’s stock price while losing money.

Other accusations indicate that the couple made fraudulent claims related to HMNY technology, using terms such as “big data” and “artificial intelligence” to describe the way subscription information was analyzed when such technology was not used.

The Securities and Exchange Commission filed charges against the former executives in September with similar allegations, and also accused the two men, as well as former MoviePass co-owner Khaled Itum, of creating or approving fake invoices that generated more than $310,000 for Itum’s personal benefit.

“The indictment reiterates the same allegations made by the Securities and Exchange Commission in the Commission’s latest complaint filed on September 27,” Farnsworth spokesman Chris Bond said in an email to CNN. “As with the SEC filing, Mr Farnsworth is confident that the facts will establish that he acted in good faith, and that his legal team intends to challenge the allegations in the indictment until his acquittal is achieved.”

MoviePass sent shock waves through Hollywood in 2017, catching consumers on fire with an irresistible offer: $10 to watch one movie a day for an entire month. The service quickly grew to 3 million subscribers in less than a year. But MoviePass’s business model was at best unsustainable – and at worst non-existent. The company burned the cash and shut down two years after it exploded at the scene.

After closing operations in 2019 and liquidating into bankruptcy in 2020, MoviePass announced its impending comeback in August after co-founder Stacy Spikes bought the company out of bankruptcy in 2021. Spikes helped found MoviePass before he was fired in 2018 after selling the company to HMNY. He gave a presentation in New York in February, announcing the reboot and acknowledging that “a lot of people lost their money, a lot of people lost confidence” when MoviePass came out to the top, according to Variety.

Spikes had plans to get the service up and running again “on or around September 5th,” according to its website, but the site is now teasing a Chicago launch on November 9. Details are still scarce, but the company says the new MoviePass will have three pricing tiers that will cost $10, $20 or $30, depending on the market.

CNN correspondent Frank Pallotta contributed to this report.

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