Former MoviePass Execs Accused of Fraud by SEC
27.09.2022 - 22:05
/ variety.com
Gene Maddaus Senior Media Writer MoviePass was founded on a lie, the Securities and Exchange Commission alleged in a complaint filed on Monday night. The company introduced its $9.95-a-month, all-you-can-watch subscription plan in August 2017. According to the complaint, executives Theodore Farnsworth and Mitch Lowe knew that the offer was just a “marketing gimmick” and that the price was unsustainably low. But in public, they claimed that they had done rigorous market testing and determined they could turn a profit. In fact, they had done no testing, the SEC said. Asked by Variety if the company would eventually have to raise its prices, Farnsworth said, “The answer is no.” Critics, he went on, “don’t understand our business model.”
Helios and Matheson Analytics, the parent company of MoviePass, would go bankrupt after burning through hundreds of millions of dollars. According to the SEC, Farnsworth and Lowe repeatedly lied to the public about the MoviePass business model and then, as losses mounted, devised fraudulent methods to try to staunch the bleeding. In April 2018, Farnsworth told Variety that the company was not running out of money, and that he was in fact sitting on “hundreds of millions of dollars of dry powder.” “This is a unicorn company,” he declared. But the prior week, his own CFO had told him: “Something has to change, we really need to curtail spending and usage. I know I am stating the obvious… We cannot survive at this level of burn.” The SEC accused Lowe and Farnsworth of violating securities laws and of profiting from their alleged fraud. The agency also charged that Khalid Itum, a MoviePass executive, submitted false invoices to the company and obtained more than $310,000 for his personal
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