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Former MoviePass CEOs sued by SEC for allegedly misleading investors

Ex-MoviePass information will not be provided due to allegations of fraud.

The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Mitch Lowe, the former CEO of MoviePass, and Ted Farnsworth, the former CEO of MoviePass parent company Helios and Matheson Analytics (HMNY), for allegedly defrauding traders as part of a dramatic deal. Subscription service starting at $9.99 every 30 days.

According to Insider, the SEC filing said Lowe and Farnsworth “devised fraudulent methods” to overlay information and “falsely mislead” the public into thinking their site was not successful with subscribers in order to save money.

“In the face of debilitating harmful financial flows — rather than telling the public reality — Farnsworth and Lowe devised misleading methods to prevent Heavy MoviePass customers from using the service, falsely and misleadingly informing the public that use was purely or Because of the measures the company took steps to deal with subscribers who allegedly violated MoviePass’ terms of service,” the complaint reads.

The lawsuit names former MoviePass vice president Khalid Itum as a defendant. Itum may be charged with submitting false payments and receiving more than $310,000 from MoviePass and HMNY.

“The issues involved in the complaint may have been the subject of an investigation that was publicly disclosed by the company and various retailers of information nearly three years ago, and Mr Farnsworth’s authorized staff will continue to address the complaint,” said Chris Bond, Ted Farnsworth’s Spokesperson, to Insiders. “Mr. Farnsworth continues to act in good faith at all times in the pursuit of the best of his company and shareholders.”

After launching a $9.99-a-month subscription in 2017, MoviePass applied for a chapter in 2020, allowing individuals to watch movies on a daily basis. The service originally launched in 2011, but after switching to a $9.99-a-day-a-movie model in 2017, it grew from 20,000 to 100,000 subscribers in two days, eventually reaching more than 3 million subscribers in 2018. Chapter, the company said investigations by the federal Commerce Department, the U.S. Securities and Exchange Commission, four California district attorneys and the New York Bar have not been completed. Farnsworth and Lowe reached a settlement with the FTC in June 2021 and a $400,000 settlement with California prosecutors.

MoviePass has since relaunched in August 2022 under the leadership of true founder Stacy Spikes, who left the company in 2018. Subscription pricing tiers include $10, $20, and $30 options. Each subscription possibility offers monthly redemption credits for movies, but unlike MoviePass’s $9.99 per 30-day idea, there are no unlimited viewing possibilities. The location’s beta model and its waitlist collapsed on day one, with over 463,000 subscribers.

“That’s a good downside,” MoviePass founder and CEO Spikes advised IndieWire individually. “We drink from the fireplace hose.”

Speaking of the revamped website, Spikes added: “It’s more of a marketplace. It’s another day where you don’t even notice the math behind the scenes.”

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SEC indicts ex-MoviePass CEO over fraudulent transactions

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