Nov. 5 () –
Two former directors of MoviePass, a US subscription service for buying movie tickets, have been indicted by the US Department of Justice for their role in a scheme to allegedly defraud investors of Helios & Matheson Analytics Inc. (HMNY), parent of MoviePass and listed on the Florida and New York Stock Exchanges.
In a press release sent this past Friday, the Department of Justice indicates that Theodore Farnsworth and Mitch Lowe would have participated in this plan to “artificially” inflate the price of HMNY shares and attract new investors. At the time this fraud would have taken place, Farnsworth was the Chairman and CEO of HMNY, and Lowe was the CEO of MoviePass.
These two businessmen are accused of misleading investors in launching a subscription that allowed “unlimited” movies to be seen in theaters for $9.95. Specifically, the press release indicates that Farnsworth and Lowe would have defended that it was a “proven, sustainable and profitable” plan and would allow the company to find its “balance point” only through these subscriptions.
However, officials allegedly knew that this was a “temporary marketing gimmick” to increase new subscribers and, in turn, “artificially” inflate HMNY’s share price and attract new investors. In fact, the Department of Justice points out that MoviePass lost money as a result of this subscription plan.
The department also accuses the two managers of misleading about HMNY’s data processing and artificial intelligence capabilities and making “false” comments about an alleged diversification of revenue sources. In addition, both former directors would have instructed their employees to “prevent” some subscribers from using the subscription service in order to alleviate MoviePass’ cash deficit situation.
Farnsworth and Lowe would have transferred this information both through press releases, as well as communications to the SEC -the US CNMV-, in interviews with the media and in podcasts, with the aim of reaching investors and the public in general.
Both former directors are accused of stock fraud and electronic fraud. They each face a maximum prison sentence of 20 years on each count.
