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 connection with their role in a scheme to allegedly “defraud investors by making materially false and misleading statements regarding the business and activities of HMNY and MoviePass.”
Court documents released by the Department of Justice said the pair artificially inflated the price of HMNY’s shares to attract new investors.
At the time of the alleged fraud, Farnsworth was the chairman of HMNY and Lowe was the CEO of MoviePass – each charged with one count of securities fraud and three counts of wire transfer fraud.
Farnsworth was the chief executive officer of HMNY, MoviePass’ parent company between 2017 and 2020, while Lowe led MoviePass between 2016 and its collapse in 2020.
If convicted, they each face a maximum sentence of 20 years in prison for each case.
Assistant Attorney General Kenneth Polite Jr. of the Justice Department’s Criminal Division said the department “is committed to protecting the public from exploitation by criminals for its own gain.”
“As these charges make clear, the Department, along with our law enforcement partners, will hold corrupt C-Suite executives engaged in securities fraud accountable for their actions,” he said.
Theodore Farnsworth, 60, (right) and Mitch Lowe, 70, (center) have been charged in a Justice Department securities fraud case
The FBI’s New York Field Office investigates the case, while attorney Christopher Fenton of the Criminal Division’s Fraud Department continues to pursue the case
The two former MoviePass executives are charged with one count of securities fraud and three counts of wire transfer fraud. If convicted, they each face a maximum sentence of 20 years in prison for each case
FBI New York Field Office Deputy Director Michael J. Driscoll said the couple was “deliberately involved in fraudulent schemes.”
“A fraud attempt of this nature erodes public confidence in our financial markets,” he said.
“The FBI is committed to ensuring that this type of fraud and scam is discovered and that the perpetrators are held accountable for their actions in the criminal justice system.”
The indictment alleges Farnsworth and Lowe falsely claimed that MoviePass’s $9.95 plan was “tested, would be sustainable, profitable, or even break on subscription fees,” knowing it was “a temporary marketing gimmick to attract new subscribers.” grow and, in turn, artificially inflate HMNY’s stock price and attract new investors.”
In addition, the charges allege that Farnsworth and Lowe made false claims that HMNY “owned and used technologies, such as “big data” and “artificial intelligence” platforms, to generate revenue by analyzing and monetizing the data MoviePass collected from subscribers. to make.
The court documents allege that Farnsworth and Lowe “directed MoviePass employees to implement numerous tactics to prevent certain subscribers from using the so-called “unlimited” service they paid for, in an attempt to reduce MoviePass’ cash shortfalls.
Farnsworth and Lowe are accused of making these “materially false and misleading statements” in press releases, US Securities and Exchange Commission (SEC) filings, interviews on podcasts, on television, and in print and online media.
The FBI’s New York Field Office is investigating the case, while attorney Christopher Fenton of the Criminal Division’s Fraud Department is pursuing the case.
End of September, SEC has 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-a-month business model.
The suit came as a new version of MoviePass was launched to re-establish itself under the leadership of co-founder Stacy Spikes.
The company recently launched a beta service in Chicago, Dallas and Kansas City, with packages starting at $10 per month.