An indictment was released today in Miami charging two Florida men for their role in a scheme to defraud investors of Helios & Matheson Analytics Inc. (HMNY), a Florida-based publicly traded company and in New York which was the parent company of MoviePass Inc. (MoviePass).

According to court documents, Theodore Farnsworth, 60, of Miami, and J. Mitchell Lowe, 70, of Miami Beach, allegedly engaged in a scheme to defraud investors through materially false and misleading representations regarding the activities and the operations of HMNY and MoviePass to artificially inflate HMNY’s share price and attract new investors. At the time of the alleged fraud, Farnsworth was the chairman and CEO of HMNY, and Lowe was the CEO of MoviePass.

“The Department of Justice is committed to protecting the public from exploitation by criminals for personal gain,” said Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division. “As these charges make clear, the Department, together with our law enforcement partners, will hold corrupt C-suite executives who engage in securities fraud accountable for their actions.”

“As alleged, the defendants deliberately and publicly engaged in a fraudulent scheme designed to falsely underpin their company’s stock price,” said Deputy Director in Charge Michael J. Driscoll of the FBI’s New York field office. “Scam attempts of this nature erode public confidence in our financial markets. The FBI is committed to ensuring that these types of frauds and scams are uncovered and that the perpetrators are held accountable for their actions in the criminal justice system.

The indictment alleges Farnsworth and Lowe falsely claimed that MoviePass’ $9.95 “unlimited” plan – in which new subscribers could see “unlimited” movies in theaters with no blackout dates for a Fixed monthly fee of $9.95 – has been tested, durable and would pay off or break even on subscription fees alone. Farnsworth and Lowe allegedly knew that the “unlimited” $9.95 plan was a temporary marketing gimmick to attract new subscribers and, in turn, artificially inflate HMNY’s share price and attract new investors. As a result, MoviePass lost money with the $9.95 “unlimited” plan.

Additionally, Farnsworth and Lowe allegedly made false claims that HMNY 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. However, the indictment alleges that Farnsworth and Lowe knew that HMNY did not possess such technologies or capabilities to monetize MoviePass subscriber data or incorporate such technologies into the MoviePass app.

Farnsworth and Lowe also allegedly made false and misleading statements about the positive impact that several sources of revenue (other than subscription fees) had on MoviePass’ profitability and self-sufficiency. These statements were misleading because, as the indictment alleges, Farnsworth and Lowe knew that MoviePass did not have a non-subscription revenue stream that would make MoviePass self-sufficient or offset the losses MoviePass suffered as a result of the “unlimited” plan. “unprofitable $9.95.

Farnsworth and Lowe also allegedly incorrectly claimed that the cost of goods for MoviePass, as reflected in the number of tickets each subscriber purchased with their subscription, naturally decreased over time, consistent with their stated expectations. Behind the scenes, Farnsworth and Lowe allegedly ordered MoviePass employees to implement numerous tactics to prevent certain subscribers from using the supposedly “unlimited” service they had paid for in an attempt to make up MoviePass’ cash flow shortfalls.

Further, Farnsworth and Lowe allegedly made these materially false and misleading statements in press releases, SEC filings, podcast and television interviews, and in print and online media, which were all intended to reach, and sometimes have actually reached, investors and the general public across the United States.

Farnsworth and Lowe are each charged with one count of securities fraud and three counts of wire fraud. If convicted, they each face a maximum sentence of 20 years in prison on each count. A federal district court judge will determine any sentence after considering US sentencing guidelines and other statutory factors.

The FBI field office in New York is investigating the case.

Trial Attorney Christopher Fenton of the Criminal Division’s Fraud Section is prosecuting the case.

If you believe you are a victim in this case, please contact the Fraud Section Victim Witness Unit toll-free at (888) 549-3945 or by email at [email protected] Victims can find case updates and additional information at: https://www.justice.gov/criminal-vns/case/MoviePass.

An indictment is only an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in court.