Former MoviePass execs are being sued by the SEC for lying to customers
Also: SEC Charges Former Executives At Moviepass and Its Parent Company for Making False Statements to Investors and Falsifying Books and Records (Securities and Exchange Commission)
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Source: TechCrunch
Former MoviePass execs are being sued by the SEC for lying to customers
Lauren Forristal@laurenforristal / 5:49 PM EDT•September 27, 2022
Ahead of the official relaunch of subscription-based movie ticketing service MoviePass, the Securities and Exchange Commission (SEC) filed a complaint against three of its former executives, claiming they lied to investors and the public.
The SEC filing targeted former MoviePass CEO Mitch Lowe and Ted Farnsworth, the former CEO of parent company Helios and Matheson Analytics (HMNY), claiming they lied about how it planned to be profitable and used “fraudulent tactics to prevent MoviePass’s heavy users from using the [unlimited subscription service],” the SEC wrote.
Chris Bond, a spokesperson for Farnsworth, sent this statement to TechCrunch: “The complaint concerns matters subject to an investigation that the company and other news outlets publicly disclosed nearly three years ago, and Mr. Farnsworth’s legal team will maintain the challenge to this complaint. Mr. Farnsworth continues to maintain that he has always acted in good faith in the best interests of his companies and shareholders.”
When under the rule of Lowe and Farnsworth, MoviePass promised users a $9.95 per month subscription that would give them an unlimited number of 2D movie tickets. However, MoviePass quickly kissed “unlimited” goodbye, ending the service that was likely losing a lot of money. The company filed for bankruptcy in 2020.
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Read more: https://techcrunch.com/2022/09/27/former-moviepass-execs-are-being-sued-by-the-sec-for-lying-to-customers/
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Source: Securities and Exchange Commission
SEC Charges Former Executives At Moviepass and Its Parent Company for Making False Statements to Investors and Falsifying Books and Records
Litigation Release No. 25525 / September 27, 2022
Securities and Exchange Commission v. Theodore J. Farnsworth, J. Mitchell Lowe, and Khalid Itum, No. 1:22-civ-08226 (S.D.N.Y. filed Sept. 26, 2022)
The Securities and Exchange Commission announced today that it filed charges against Theodore J. Farnsworth, former CEO of Helios & Matheson Analytics Inc. ("HMNY") and J. Mitchell Lowe, former CEO of MoviePass, Inc. ("MoviePass"), for allegedly making materially false or misleading statements concerning key aspects of MoviePass's business model. The complaint also charges Farnsworth, Lowe, and Khalid Itum, a former MoviePass executive, with creating or approving false invoices that allowed Itum to obtain more than $310,000 from MoviePass and HMNY for his personal benefit.
According to the complaint, between August 2017 and at least March 2019, Farnsworth and Lowe intentionally and repeatedly made misstatements in HMNY Commission filings, press releases, and in the press that MoviePass could be profitable at its new, $9.95 per month subscription price; about HMNY's purported data analytics capabilities; and concerning HMNY's ability to fund MoviePass's operations. As further alleged in the complaint, Farnsworth and Lowe also devised fraudulent tactics to prevent MoviePass's subscribers from using the service. In addition, the complaint alleges that, between January and April 2018, Farnsworth and Lowe knowingly approved false invoices that Itum submitted to HMNY and MoviePass, disguising bonus payments as services purportedly provided by an entity Itum controlled.
The SEC's complaint, filed in the Southern District of New York, charges Farnsworth and Lowe with violating Section 17(a) of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and charges Lowe with aiding and abetting Farnsworth's and HMNY's violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The complaint further charges Farnsworth, Lowe, and Itum with violating Section 13(b)(5) of the Exchange Act and Rules 13b2-1 and 13b2-2 thereunder and aiding and abetting HMNY's violations of Section 13(b)(2)(A) of the Exchange Act. The SEC seeks permanent injunctions, disgorgement with prejudgment interest, and civil penalties against all defendants, and also seeks conduct-based injunctions and officer-and-director bars against Farnsworth and Lowe.
The SEC's investigation was conducted by Elizabeth Butler, Christopher Mele, and Tian Wen of the New York Regional Office, with assistance from James D'Avino, Alan Maza, and Alistaire Bambach, and was supervised by Thomas P. Smith, Jr. The litigation will be led by Jack Kaufman.
https://www.sec.gov/litigation/litreleases/2022/lr25525.htm
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