Theodore Farnsworth, the former CEO of Helios and Matheson Analytics—the parent company of MoviePass—has pleaded guilty to charges of securities fraud and conspiracy. His fraudulent activities could result in a prison sentence of up to 25 years, marking a significant development in the downfall of a once-popular subscription service.
Farnsworth, alongside J. Mitchell Lowe, the former CEO of MoviePass, is accused of deceiving investors about the viability of the company’s business model. Between 2017 and 2019, the pair misrepresented MoviePass as a sustainable service, offering unlimited movie tickets for $9.95 per month. In reality, they were fully aware this model was unsustainable. These misrepresentations aimed to attract new investors and artificially inflate the parent company’s stock value.
The U.S. Department of Justice disclosed that Farnsworth misrepresented Helios and Matheson Analytics as using artificial intelligence to profit from data collected from MoviePass subscribers. Contrary to these assertions, the company lacked the technology and capability to implement such features in its app. Furthermore, Farnsworth concealed the fact that the subscription model was a financial liability, portraying it as a legitimate strategy to generate revenue.
MoviePass initially captivated Hollywood and consumers alike when it launched its unprecedented subscription service in 2017. Within a year, the service garnered 3 million subscribers, fueled by the allure of low-cost access to daily movie viewings. However, the company quickly burned through cash, and its unsustainable model led to its closure in 2019.
In a separate legal development, Lowe also pleaded guilty to securities fraud in September. He faces up to five years in prison, with sentencing scheduled for March. While both executives admitted to their roles in misleading investors, the Justice Department highlighted the severity of their actions, labeling them as deliberate attempts to inflate stock prices and defraud stakeholders.
Farnsworth has admitted guilt to a charge of securities fraud, which carries a potential 20-year sentence, along with a charge of conspiracy to commit securities fraud, which could lead to an additional five years. Sentencing has not been scheduled yet, and his attorneys have stated that the plea reflects his acknowledgment of responsibility for his actions.
Although MoviePass collapsed under the weight of its flawed business model, the brand was revived in 2022 by cofounder Stacy Spikes. The relaunch introduced a revised subscription model, eliminating the unlimited theater visits that once defined the service.
This case serves as a cautionary tale about the risks of overpromising and underdelivering in the corporate world. Investors and consumers alike are left reflecting on the meteoric rise and fall of MoviePass, once a revolutionary concept in the entertainment industry but now a symbol of financial mismanagement and deceit.
