Former MoviePass chief executive Mitch Lowe has pled guilty to a securities fraud charge related to his role in swindling investors about the company’s monthly movie subscription service.
Former MoviePass Execs Sued by SEC
Lowe on Monday entered a plea agreement in which he admitted fault for conspiring to inflate the price of MoviePass’ stock by lying about the profitability and sustainability of the $9.95-per-month unlimited plan in exchange for the dismissal of securities and wire fraud charges. He faces a maximum of five years in prison, with the expectation that he’ll be sentenced to less for assisting with ongoing investigation and cases, plus a fine of up to $250,000 or twice the amount he made off of the alleged scheme.
“Mitch is a good man who is looking to move forward with his life,” said his lawyers Margot Moss and David Oscar Markus in a statement. “He has accepted responsibility for his actions in this case and will continue to try to make things right.”
In 2022, federal prosecutors brought in federal court in Florida an indictment against Lowe, Ted Farnsworth, CEO of Helios and Matheson Analytics , which acquired MoviePass in 2017, and Khalid Itum, a business development exec for the company. Lowe was accused of making false and misleading statements about MoviePass’ monthly subscription offering, including that it would be profitable or break even on subscription fees alone and that the number of tickets being bought by subscribers was declining, among other things.
Prosecutors alleged that Lowe and Farnsworth knew that MoviePass was losing money as a result of the marketing gimmick meant to drive subscriber growth and that the company was actively preventing users from using the service. Employees were directed to throttle high activity subscribers, according to the indictment.
Asked about AMC saying that MoviePass would have to lower prices at some point, Lowe shot down the assertion and stated, “They don’t understand our business model.” Prosecutors cited multiple statements to the press and in securities filing in which he touted the sustainability of the plan, with the purpose of inflating the company’s stock.
James Cameron to Direct 'Ghosts Of Hiroshima' After 'Avatar' Sequels
After Lowe, who wrote a memoir about the rise and fall of the MoviePass, is sentenced, prosecutors will drop securities and wire fraud charges, which carried 20 years per count, according to the plea agreement. The government estimated that the scheme led to losses of more than $300 million but agreed to lower the figure to $25 million, which will be taken into account during sentencing, as part of the deal.
The Securities and Exchange Commission continues to pursue a case against Lowe for alleged violations of federal securities laws concerning key aspects of MoviePass’s business model. The allegations involve Lowe knowingly approving false invoices that disguised bonus payments as services provided by an entity Itum controlled.
Farnsworth faces a trial scheduled to start next year.
In 2021, Lowe, Farnsworth and Helios and Matheson settled a lawsuit from the Federal Trade Commission accusing it of deceptive marketing practices and actively preventing subscribers from using the platform. Under the agreement, the execs and the company are barred from “misrepresenting their business and data security practices” and “must implement comprehensive information security programs” in any future corporate endeavors.
This was followed by a jury in February finding Itum guilty of two counts of wire fraud related to embezzling at least $260,000 from MoviePass to repay money he borrowed to fund a party at Coachella Valley Music and Arts Festival in 2018.
TV Ratings: Emmys Jump by 54 Percent, Stop Streak of All-Time Lows
Local News
