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Two former executives at MoviePass and its former parent company Helios and Matheson Analytics (HMNY), Theodore Farnsworth, 60, and Mitch Lowe, 70, have been charged in a securities fraud case, according to court documents.
The two Florida men have been charged in relation to their roles in a scheme to allegedly ‘defraud investors through materially false and misleading representations relating to HMNY and MoviePass’s business and operations.’
Court documents released by the Department of Justice said that the pair artificially inflated the price of HMNY’s stock to attract new investors.
At the time of the alleged fraud, Farnsworth was HMNY’s chairman and Lowe was MoviePass’s CEO – each are charged with one count of securities fraud and three counts of wire fraud.
Farnsworth was the chief executive officer of HMNY, the parent company of MoviePass between 2017 and 2020 while Lowe led MoviePass between 2016 and its collapse in 2020.
If convicted, they each face a maximum penalty of 20 years in prison on each count.
Assistant Attorney General Kenneth Polite Jr. of the Justice Department’s Criminal Division said that the department is ‘committed to protecting the public from being exploited by criminals for their own profit.’
‘As these charges make clear, the Department, together with our law enforcement partners, will hold corrupt C-Suite executives who engage in securities fraud accountable for their actions,’ he said.
Theodore Farnsworth, 60, (right) and Mitch Lowe, 70, (center) have been charged in a securities fraud case by the Department of Justice
The FBI New York Field Office is investigating the case while trial Attorney Christopher Fenton of the Criminal Division’s Fraud Section is prosecuting the case
The two former MoviePass executives are charged with one count of securities fraud and three counts of wire fraud. If convicted, they each face a maximum penalty of 20 years in prison on each count
Assistant Director in Charge Michael J. Driscoll of the FBI New York Field Office said the pair had ‘deliberately engaged in fraudulent schemes.’
‘Attempted scams of this nature erode the public’s faith in our financial markets,’ he said.
‘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.’
The indictment alleges Farnsworth and Lowe falsely claimed that MoviePass’ $9.95 plan ‘was tested, sustainable, and would be profitable or break even on subscription fees alone’ while knowing it was ‘a temporary marketing gimmick to grow new subscribers and, in turn, artificially inflate HMNY’s stock price and attract new investors.’
Additionally, the indictment alleges that Farnsworth and Lowe made false claims that HMNY ‘possessed and used technologies, like ‘big data’ and ‘artificial intelligence’ platforms, to generate revenue by analyzing and monetizing the data MoviePass collected from subscribers.
The court documents allege Farnsworth and Lowe ‘directed MoviePass employees to implement numerous tactics to prevent certain subscribers from using the so-called ‘unlimited’ service for which they had paid, to try to ease MoviePass’ cash shortfalls.
Farnsworth and Lowe are accused of making these ‘materially false and misleading representations’ in press releases, US Securities and Exchange Commission (SEC) filings, interviews on podcasts, on television and in print and online media.
The FBI New York Field Office is investigating the case while trial Attorney Christopher Fenton of the Criminal Division’s Fraud Section is prosecuting the case.
In late September, SEC filed a lawsuit against the two former MoviePass executives.
The agency accused Farnsworth and Lowe of misleading investors about the viability of the company’s $9.95 per month business model.
The suit came as a new version of MoviePass was launched to re-establish itself under the leadership of cofounder Stacy Spikes.
The company recently launched a beta service in Chicago, Dallas and Kansas City, offering packages that start at $10 per month.
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