Former MoviePass executives indicted for fraud, “attempted scam”
MoviePass may be relaunching, but former CEOs of the movie subscription service are still embroiled in scandal.
As reported by Variety, the former CEO of MoviePass’s parent company Helios & Matheson Analytics Inc., and the former CEO of MoviePass Mitchell Lowe have each been charged with four counts of fraud: one count of securities fraud, and three counts of wire fraud. If convicted, they each face a maximum of 20 years in prison for each count.
MoviePass is officially back, for better or worse
The Department of Justice unsealed the charges on Friday, November 4, a little over a month after the Securities and Exchange Commission filed charges against Farnsworth and Lowe for fraudulent behavior.
Both the DOJ and the SEC allege that Farnsworth and Lowe claimed that MoviePass’s “unlimited” plan, where customers could pay $9.95 a month to see unlimited movies in theaters, had been market tested and proven to be sustainable. The model turned out to be anything but, with MoviePass losing money, allegedly trying to prevent customers from seeing movies, and ultimately shutting down in 2019.
The DOJ alleges that Farnsworth and Lowe made these false claims in order to bolster the stock price of Helios & Matheson and attract more investors, knowing full well that the $9.95 unlimited plan was a “marketing gimmick.” Farnsworth and Lowe also allegedly made fraudulent statements about using “big data” and “artificial intelligence” to monetize subscriber data without actually having access to or using these technologies.
The FBI New York Field Office is investigating the case. Said Assistant Director in Charge Michael J. Driscoll: “attempted scams of this nature erode the public’s faith in our financial markets. 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.”
Chris Bond, a spokesman for Farnsworth, said in a statement that Farnsworth would be fighting the charges. “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,” said Bond.
As of now, Farnsworth and Lowe do not seem to be part of the new, yet-to-be-officially launched version of MoviePass.