Former MoviePass executives charged with securities fraud

Two former MoviePass executives have been charged with securities fraud for allegedly misleading investors on the company's business model and sustainability.

Theodore Farnsworth, the former CEO of parent company Helios & Matheson, and Mitchell Lowe, the former CEO of MoviePass, were each charged with one count of securities fraud and three counts of wire fraud.

MoviePass blew up in 2017 after announcing its all-you-can-eat subscription plan, priced at $9, $95 per month. The service quickly grew from 20,000 members to over 3 million, but hemorrhaged money and eventually collapsed.

The charges, which were , echo allegations filed by the Securities and Exchange Commission in a civil complaint versus September 27.

Both cases allege that Lowe and Farnsworth falsely claimed that their subscription model had been tested on the market and would be sustainable over the long term.

The indictment also alleges that they falsely claimed to use "big data" and "artificial intelligence" to monetize subscriber information, and that they also falsely claimed that they were developing multiple revenue streams and lowering costs. In fact, the government claims to have taken steps to prevent subscribers from using the service in an effort to stem the bleeding.

In a statement on Friday, the FBI called its claims an "attempted scam" intended to support the share price.

“Attempted scams of this nature erode public confidence in our financial markets,” said said Michael J. Driscoll, deputy director of the FBI's New York field office. "The FBI is committed to ensuring that these types of frauds and scams are uncovered and that the perpetrators are held accountable for their actions in the criminal justice system."

Farnsworth spokesman Chris Bond said Farnsworth acted in good faith and would fight the charges.

"The indictment repeats the same allegations made by the Securities and Exchange Commission in the recent Commission complaint filed Sept. 27 against Mr. Farnsworth, regarding matters that were publicly disclosed nearly three years ago and widely reported in the media," Bond said. "As for the SEC filing , Mr. Farnsworth is confident that the facts will demonstrate that he acted in good faith, and his legal team intends to contest the allegations in the indictment until vindicated. /p>

Lowe recently published a memoir about his business career, which also included stints at Redbox and Netflix.< /p>

MoviePass also recently announced that it will be relaunching with a different business plan and new owner .

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