Theodore Farnsworth, former CEO of MoviePass' parent company, was found guilty on Tuesday of securities fraud after federal prosecutors said he misled investors about the company's “unlimited” subscription plan. I admitted it.
Mr. Farnsworth, 62, of Miami, also pleaded guilty in the Southern District of Florida to conspiring to commit securities fraud as the leader of another publicly traded company, Vinco Ventures. He tried to inflate stock prices and stole millions of dollars. He was fired from the company on his own behalf, according to prosecutors and court records.
He faces up to 20 years in prison for securities fraud charges related to his leadership of MoviePass and up to five years in prison for conspiracy charges related to his leadership of Vinco.
“Mr. Farnsworth was eager to accept responsibility for his actions,” Farnsworth's attorney Sam Rabin said in an email Tuesday evening. “The most important step in that was pleading guilty to the crimes he was charged with, which he did today.”
In 2017, when Mr. Farnsworth was chief executive of Helios & Matheson, which owned a majority stake in MoviePass, subscribers to that plan could watch “unlimited” movies at theaters for $9.95 a month. I was able to do that.
Mr. Farnsworth and J. Mitchell Rowe, then MoviePass' chief executive officer, told investors in an interview that their plan was better than good, tested and sustainable. , prosecutors said. Prosecutors say Farnsworth knew all along that the scheme was untested and defrauded investors to drive up stock prices.
“He concealed the fact that MoviePass's subscription model was a money-losing contraption,” Chief Assistant Attorney General Brent S. Wible said of Farnsworth in a statement Tuesday.
Farnsworth also told investors in interviews and news releases that his company had big data and artificial intelligence capabilities that allowed him to collect more money from MoviePass subscribers, prosecutors said. It is said that But that claim was also untrue, and the analytics company “did not possess the type of technology that could be used to monetize MoviePass subscriber data,” prosecutors said in court records.
Details of Farnsworth's guilty plea were not immediately available. Lowe pleaded guilty in September to conspiracy to commit securities fraud, according to court records. Lowe could be sentenced to up to five years in prison.
“Mitch Rowe is a good man with a history of good conduct,” Mr. Rowe's lawyers, David Oscar Marcus and Margot Moss, said in a statement Tuesday. “But like all of us, he is not perfect. He admitted his wrongdoing in this case early on and is doing everything in his power to make up for it.”
The unlimited plan was a financial disaster for theaters because they paid the full price of admission. The plan was created in hopes of attracting more subscribers who would pay a relatively low monthly fee to opt out of the service. That was a miscalculation. 3 million people signed up and took full advantage.
MoviePass went bankrupt in 2019. The company returned in 2022 and now uses a tiered credit-based pricing system with no unlimited options.
Farnsworth has a status conference scheduled for July, according to court records. No sentencing date has been scheduled, Lavin said.
