[ad_1]
Ted Farnsworth, the former chairman of the once-viral movie theater subscription service MoviePass, was arrested Friday on criminal charges brought by the U.S. Department of Justice, according to court documents obtained by Condition.
The documents, which were filed in federal court in Florida last week, show that arrest warrants were issued Nov. 2 for both Farnsworth, 60, and his former business partner Mitch Lowe, 70, who was the former CEO of MoviePass. The documents state that Farnsworth was arrested on Nov. 4 in Washington, DC. Both executives were indicted last week for allegedly participating in a scheme to artificially inflate the price of MoviePass’ parent company, Helios and Matheson, in order to attract new investors. If convicted, the men face a maximum sentence of 20 years in prison for each count of fraud they are charged with: one count of securities fraud and three counts of wire fraud.
It was unclear from court records whether Lowe had also been arrested by authorities at that time, and he could not be reached for comment through his personal website or through his speaking agency. The filings show that Farnsworth was represented by George Terwilliger III, who was nominated to be deputy attorney general of the Department of Justice in 1992 under President George H. W. Bush. Terwilliger did not immediately respond to a request for comment. (Over the weekend, a spokesman for Farnsworth told CBS News that the former executive’s legal team plans to “challenge the allegations in the indictment until his acquittal is achieved.”)
Movie theater subscription company MoviePass has attempted to revolutionize the move-in industry by offering a low-cost subscription service that allows users to watch an almost unlimited number of movies for a monthly fee. In its heyday, MoviePass attracted about 3 million customers who paid $9.95 a month to see one movie in theaters each day. Meanwhile, MoviePass’s parent company racked up significant losses and eventually filed for bankruptcy in 2020. One of MoviePass’ co-founders, Stacey Spikes, who has not been named in any criminal charges, bought back the assets and has recently been trying to launch a second run of the service. (A MoviePass spokesperson did not immediately respond to a request for comment on whether those criminal charges have affected potential business. Condition (also reached out to ZASH Global Media and Entertainment, which Farnsworth co-founded, but did not hear back.)
The Justice Department charged Farnsworth and Lowe with allegedly defrauding investors through materially false and misleading statements during their management of the first iteration of MoviePass.
For example, in April 2018, Farnsworth and Lowe allegedly fraudulently represented that MoviePass’s $9.95 unlimited plan was tested, sustainable, and would be profitable or run smoothly with only subscription fees, according to the DOJ. Farnsworth and Lowe allegedly made false claims that Helios and Matheson owned and used technologies — such as big data and artificial intelligence platforms — to generate revenue by analyzing and monetizing data collected by MoviePass from subscribers. At the time, Helios and Matheson, a publicly traded company, was regulated by the SEC. MoviePass is a privately held company.
Farnsworth and Lowe are also accused of making materially false or misleading statements in press releases, SEC filings and media interviews. Although there is a warrant out for Lowe’s arrest, he has yet to surrender or be arrested, according to the latest documents obtained by Condition.
In a separate case, the men also face SEC charges for allegedly making materially false or misleading statements about key aspects of MoviePass’ business model.
Attorney Christopher Fenton of the Criminal Division’s Fraud Unit is prosecuting the fraud allegations in the Justice Department’s criminal case, and the FBI’s New York field office is investigating.
“The defendants are alleged to have knowingly and publicly engaged in a fraudulent scheme designed to falsely inflate their company’s stock price,” Michael J. Driscoll, assistant director in charge of the FBI’s New York field office.
Farnsworth is due in U.S. District Court in the District of Columbia on Nov. 17, according to court records.
Register for Features of Fortune email list so you don’t miss our biggest features, exclusive interviews and investigations.
[ad_2]
Source link