Former MoviePass Execs Charged with Securities Fraud
According to news sources, the former chairman and chief executive of MoviePass have been charged with criminal securities fraud for allegedly lying about whether the unlimited film ticket service actually worked and hiding huge losses from investors in order to boost its stock price.
Ted Farnsworth, 60, and J. Mitchell Lowe, 70, were charged with falsely claiming that MoviePass’s offer of unlimited tickets for just $9.95 a month was sustainable and could even be profitable when they knew it was just a marketing gimmick aimed solely at boosting subscriber numbers. By inflating the number of subscribers, the pair were able to entice new investors to pump up the company’s stock price. In reality, the company was hemorrhaging huge sums of money by giving away so many low-cost tickets. MoviePass filed for Chapter 7 bankruptcy protection in January 2020.
“The defendants deliberately and publicly engaged in a fraudulent scheme designed to falsely bolster their company’s stock price,” said Michael Driscoll, of the FBI. “Attempted scams of this nature erode the public’s faith in our financial markets,” he said.
Prosecutors also say that Farnsworth, of Miami, and Lowe, of Miami Beach, falsely claimed that MoviePass used artificial intelligence and other big data crunching methods to better generate revenue, even though they did not possess such technology.
A spokesman for Farnsworth said the former MoviePass executive is confident that the facts will demonstrate that he has acted in good faith, and his legal team intends to contest the allegations in the indictment. MoviePass was launched in 2011 as a subscription service that offered up to one movie ticket per day for a monthly fee.
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