Former MoviePass CEO pleads guilty to securities fraud

“A Florida man pleaded guilty today,” a Justice Department news release began. published Tuesday. In this case, the notorious Florida man is none other than Ted Farnsworth, the former CEO of… Movie Pass’ Parent company. His plea comes less than four months after another MoviePass leader, former CEO Mitch Lowe, He entered a guilty plea of ​​his own.

Farnsworth pleaded guilty to one count of securities fraud and one count of conspiracy to commit securities fraud. He faces a maximum of 20 years in prison for the first charge and up to five years for the last charge. A date for a sentencing hearing will be set at a later date.

the The Department of Justice charged Farnsworth62, allegedly planned to defraud investors in MoviePass’s former parent company, Helios & Matheson Analytics (HMNY). The agency accused him of making false and misleading statements about the businesses of HMNY and MoviePass to artificially inflate shares and attract investors.

If this sounds familiar, it’s because former MoviePass CEO Mitch Lowe pleaded guilty to the same charges in September. Lowe reportedly agreed to cooperate with prosecutors and regulators as part of his confession, a detail one could imagine tightening the vise on Farnsworth that led to his confession.

MoviePass subscribers I paid the company $9.95 per month For what was supposed to be unlimited movie tickets with no blackout dates. Farnsworth and Lowe told investors that the business plan was tested and sustainable and would at least break even — if not turn a profit — on subscription fees alone. Furthermore, they have used buzzwords like “big data” and “artificial intelligence” to claim that they can alchemize subscriber data and turn it into profit.

But according to the Department of Justice (and… logic), that was not the case at all. Instead, this was a marketing gimmick to attract new subscribers and increase HMNY’s stock price.

Farnsworth falsely claimed that the cost of MoviePass merchandise (the number of tickets each subscriber purchased with their subscription) declined naturally over time, which was consistent with his stated expectations. But the Justice Department says that’s because the company directed MoviePass employees to clamp down on subscribers who used the service to buy most movies, preventing them from getting what they were promised from their “unlimited” memberships. This is consistent with Reports As of 2019, employees were ordered to change passwords for frequent moviegoers.

Unsurprisingly, the company lost money from this plan. A The downward spiral beganAnd MoviePass and its parent company It declared bankruptcy in 2020 The two men responsible for the unbelievable scheme in Florida have pleaded guilty in federal court.

The company has been around ever since It has been revived with a new business model After co-founder Stacey Spikes He bought her scraps In 2021.