MoviePass' previous executives' boss could potentially spend a quarter of a century behind bars
MoviePass' previous executives' boss could potentially spend a quarter of a century behind bars
In a statement on Tuesday, the US Department of Justice accused Theodore Farnsworth of participating in fraudulent activities while serving as the head of Helios and Matheson Analytics, formerly MoviePass's parent company. From 2017 to 2019, Farnsworth allegedly made misleading statements to attract new investors, falsely claiming that MoviePass's business model of offering unlimited movies for $9.95 a month was sustainable.
Farnsworth, along with MoviePass's former CEO, J. Mitchell Lowe, reportedly overinflated the company's stock price, a claim supported by court records. Lowe pleaded guilty to securities fraud last September, with his sentencing scheduled for March. Lowe's lawyers emphasized that he was seeking to move forward and make amends.
The Justice Department stated that Farnsworth knew that the company did not possess the artificial intelligence capabilities he had claimed to use for monetizing MoviePass subscriber data and generating revenue. The DOJ also indicated that Farnsworth lied about MoviePass's subscription model and the effectiveness of its AI.
MoviePass gained popularity in 2017, promising nearly $10 for a daily movie ticket subscription. Despite rapid growth to over 3 million subscribers in less than a year, the company's business model was unsustainable, as evidenced by its shutdown just two years later.
As of 2022, MoviePass had been relaunched without the unlimited theater visit option, led by former cofounder Stacy Spikes. In response to Farnsworth's guilty plea, his lawyer stated that he accepted responsibility for his actions, marking the most critical step towards accountability.
Farnsworth faces up to 20 years in prison for securities fraud and an additional five years for conspiracy to commit securities fraud. The sentencing hearing for Farnsworth has not been scheduled yet. To reiterate, both Farnsworth and Lowe are accused of misleading investors about MoviePass's financial status and engaging in schemes to manipulate HMNY's stock price.
The US Department of Justice alleged that Farnsworth's misconduct significantly impacted Helios and Matheson Analytics' business operations and reputation. Farnsworth's guilty plea underscores the importance of honesty in the business world, as deceiving investors can have severe consequences.