MoviePass’ former CEO and former parent company leader have been charged with securities fraud for misleading investors about the sustainability and profitability of the company’s movie-by-day subscription model, according to a Justice Department release on Friday. was indicted on
J. Mitchell Lowe, former CEO of the movie-ticket subscription service, and Theodore Farnsworth, former leader of the company’s now-defunct parent Helios & Matheson Analytics Inc (HMNY (HMNY)), said, “Substantially according to the release. , false and misleading representations of business activities to boost stock prices and attract investors.”
“As alleged, defendant was willfully and openly involved in a fraudulent scheme designed to falsely boost the company’s stock price,” said Michael J. Driscoll, deputy director for the FBI New York Field Office, in a release. said in The men each face one count of securities fraud and three counts of wire fraud and face up to 20 years in prison. Farnsworth appeared in his DC District Court for the first time on Friday after appearing voluntarily.
Lowe and Farnsworth lied about an “unlimited” subscription plan that gives customers the chance to watch as many movies as they want in theaters for a flat monthly fee of $9.95, and that the system is tested, sustainable and It is accused of telling investors that profits or mass production are possible. At least the break-even point. According to court documents, the two men knew these allegations to be false and claimed that they used the scheme to increase subscriber numbers and increase HMNY’s share price at a loss. increase.
In addition, the two were accused of making fraudulent claims over HMNY’s technology, using terms such as “big data” and “artificial intelligence” to deny that such technology was involved. It is said that it explained how to analyze the subscription information in the case.
Lowe and Farnsworth did not respond to CNN’s request for comment.
The Securities and Exchange Commission indicted the former executive in September with similar allegations, and also accused two men and fellow former MoviePass executive Khalid Itum of making more than $310,000 for Itum’s personal gain. Accused of creating or approving invoices.
MoviePass shocked Hollywood in 2017, setting consumers on fire with its compelling offers. The service quickly grew him to 3 million subscribers in less than a year. But MoviePass’ business model was unsustainable at best and non-existent at worst. The company ran out of cash and closed two years after it burst on the scene.
After ceasing operations in 2019, liquidating and going bankrupt in 2020, and co-founder Stacy Spikes acquiring the company in 2021, MoviePass announced an impending return in August. HMNY. According to Variety, he gave a presentation in New York in his February, in which he announced the reopening, and that “a lot of people lost money and a lot of people lost credibility” when MoviePass collapsed. admitted.
According to the website, Spikes had planned to relaunch the service “around September 5th,” but now the site hints at a November 9th launch in Chicago. Details are still unclear, but the company says the new MoviePass will come in his three price tiers of $10, $20, or $30, depending on the market.
CNN’s Frank Parrotta contributed to this report.