MoviePass is an American subscription based ticketing service, that sold movie tickets over the internet. Almost a month ago, the U.S. SEC (Securities and Exchange Commission) sued two former top executives at MoviePass and its parent company, Helios + Matheson, for fraud.
Today the Justice Department today unsealed an indictment charging those same executives, Theodore Farnsworth and J. Mitchell Lowe, each with securities fraud and three counts of wire fraud. If found guilty, they face a maximum penalty of 20 years in prison for each count, totaling about 80 years. At the time of the alleged fraud, Farnsworth was Helios + Matheson’s Chairman and CEO, and Lowe was MoviePass’s CEO.
According to Deadline “The duo “allegedly engaged in a scheme to defraud investors through materially false and misleading representations relating to HMNY and MoviePass’s business and operations to artificially inflate the price of HMNY’s stock and attract new investors,” according to the indictment.”
To be specific, this indictment alleges that Farnsworth and Lowe “falsely claimed that MoviePass’s $9.95 ‘unlimited’ plan – in which new subscribers could see ‘unlimited’ movies in theaters with no blackout dates for a flat monthly fee of $9.95 , was was tested, sustainable, and would be profitable or break even on subscription fees alone. Farnsworth and Lowe allegedly knew that the $9.95 ‘unlimited’ plan was a temporary marketing gimmick to grow new subscribers.
The online movie ticketing company ‘s goal was to popularize fixed-price ticket buying, a tool widely used in many international markets, but ran into problems with its customers after deciding to offer an unsustainable fixed monthly price. After increasing the monthly price from its previous levels of $40 to $50 a month, the company still had to fulfill customer orders for tickets. An inability to satisfy surging demand led to outages and disruptions of service at the height of the 2019 summer box office season.
Chris Bond, a spokesperson for Farnsworth said in a statement to The Verge “The indictment repeats the same allegations made by the Securities and Exchange Commission in the Commission’s recent complaint filed on September 27th against Mr. Farnsworth, concerning matters that were publicly disclosed nearly three years ago and widely reported by the news media. As with the SEC filing, Mr. Farnsworth is confident that the facts will demonstrate that he has acted in good faith, and his legal team intends to contest the allegations in the indictment until his vindication is achieved.”
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