Two former leaders of MoviePass and its parent entity, Helios and Matheson Analytics, are facing federal charges for allegedly defrauding investors.The dramatic public collapse of several years ago.
The Justice Department said an indictment Friday charged former Helios and Matheson CEO Theodore Farnsworth and former MoviePass CEO Michelle Lowe one each of securities fraud and three each of wire fraud.
Farnsworth, 60, and Lowe, 70, are facing similar charges in a civil lawsuit filed against them by the Securities and Exchange Commission in September. They reached a settlement with the Federal Trade Commission last year on another complaint alleging that they prevented MoviePass customers from using the app’s services as advertising while failing to protect their personal data. . Lawyers for Farnsworth and Lowe did not immediately respond to a request for comment.
The latest federal indictment accuses Farnsworth and Lowe of deliberately engaging in an alleged scheme to defraud Helios and Matheson’s investors, with both executives calling misleading and “materially false” information about the company’s business model and operations. Appeal to new financiers by sharing and securing. To artificially inflate their stock prices, according to the Justice Department.
The indictment comes nearly five years after MoviePass, which first launched in 2011, was acquired by Helios and Matheson and later announced a significant drop in the app’s monthly subscription fee – an unlimited number of movies to watch. For only $9.95 per month – increasing the subscription in one bid. Although the move quickly grew MoviePass’ customer base, it cut profits significantly, and the company filed for bankruptcy protection in 2020. The service relaunched this year with a new advertising component.
Assistant Director in charge of the FBI New York Field Office Michael J. “As alleged, the defendants deliberately and publicly engaged in a fraudulent scheme to unfairly inflate their company’s share price,” Driscoll said in a statement accompanying the justices. The department’s announcement outlines the charges.
“Such attempted scams undermine public confidence in our financial markets,” the statement said. “The FBI is committed to ensuring that this type of fraud and fraud is uncovered and that perpetrators are held accountable for their actions in the criminal justice system.”
The federal indictment alleged that Farnsworth and Lowe’s knew the $9.95 MoviePass “unlimited” plan was unsustainable and “a temporary marketing gimmick to develop new customers” that would not generate substantial revenue, despite claims that the model was tested and “would be profitable or even a break on membership fees alone,” the Justice Department said.
Prosecutors accused both former CEOs of making false and deceitful statements about MoviePass’ revenue streams outside of subscription fees — such as the artificial intelligence platform that Farnsworth and Lowe’s allegedly claimed used customers’ data. was being used to collect and monetize – alleged that no one was. The indictment also alleged that Farnsworth and Lowe’s instructed employees to block certain customers from accessing MoviePass services in order to promote a false claim that the company’s cost of goods was “naturally decreasing.”
The Justice Department said the FBI New York field office is investigating the matter. If convicted of the charges, Farnsworth and Lowe could face up to 20 years in prison for each count.