New York
The former chief executive of MoviePass’ parent company has pleaded guilty to charges of securities fraud and conspiracy and could face up to 25 years in prison.
Theodore Farnsworth “engaged in schemes to defraud investors,” the US Department of Justice said in a statement Tuesday, while he was in charge of Helios and Matheson Analytics, the former parent company of MoviePass. Between 2017 and 2019, he made “materially false and misleading representations” of the once-popular movie-ticket subscription service in an attempt to attract new investors. His alleged actions also artificially inflated the company’s stock price, the Justice Department said.
Farnsworth and J. Mitchell Lowe, the former CEO of MoviePass, once told investors that MoviePass’ business model of letting customers see unlimited movies in theaters for $9.95 per month was a sustainable business model. However, the pair knew that was false and used the pitch to inflate the parent company’s stock price, the DOJ said.
Lowe pleaded guilty to securities fraud last September with sentencing scheduled for March, according to court records. He faces a maximum of five years in prison.
Lowe “is a good man who is looking to move forward with his life,” his lawyers David Oscar Markus and Margot Moss said in statement. “He has accepted responsibility for his actions in this case and will continue to try to make things right.”
“Farnsworth’s plans and promises for MoviePass seemed too good to be true they were in fact part of a securities fraud scheme,” said James Dennehy, the assistant director in charge of FBI’s New York field office. “As he admitted (Tuesday), Farnsworth’s ploys and boasts were actually lies and misrepresentations designed to boost stock prices.”
The DOJ said that Farnsworth “falsely claimed” that Helios and Matheson Analytics used artificial intelligence to monetize data of MoviePass subscribers and generate revenue. But he knew that the company “did not possess these capabilities” and didn’t incorporate those features in the MoviePass app.
Farnsworth “concealed that MoviePass’ subscription model was a money-losing gimmick and falsely claimed that HMNY used artificial intelligence to monetize MoviePass’ subscriber data, among other misrepresentations,” said Brent Wible, the principal deputy assistant attorney general of the DOJ’s Criminal Division.
MoviePass sent shock waves through Hollywood in 2017, catching fire with consumers with an irresistible offer: nearly $10 to see one movie a day for an entire month. The service rapidly grew to 3 million subscribers in less than a year. But MoviePass’ business model was at best unsustainable and at worst nonexistent. The company burned through cash and shut down two years after bursting on the scene.
In 2022, former cofounder Stacy Spikes announced a relaunch, but the service no longer allows unlimited visits to a movie theater.
Farnsworth “was anxious to accept responsibility for his conduct,” Sam Rabin, his lawyer, said in a statement to . “The most important step in doing that was to plead guilty to the crimes with which he was charged. He did that on Tuesday by pleading guilty to securities fraud.”
As a result of pleading guilty to one count of securities fraud and one count of conspiracy of committing securities fraud, Farnsworth faces a maximum penalty of 20 years in prison for the former count and five years in prison for the latter count. Sentencing will be scheduled at a later date.
