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Former MoviePass CEO Ted Farnsworth pleaded guilty on Monday to defrauding investors and now faces up to 25 years in prison. Farnsworth was the man responsible for coming up with the doomed concept of allowing customers to pay just $9.95 per month for unlimited movie viewings.
The U.S. Department of Justice (DOJ) announced on Tuesday that Farnsworth, 62, “engaged in schemes to defraud investors” in Helios & Matheson Analytics Inc. and Vinco Ventures Inc.
Helios & Matheson Analytics bought a majority stake in MoviePass in 2017. The company filed for Chapter 7 bankruptcy and ceased all business operations in January of 2020.
“From August 2017 through March 2019, Farnsworth and his co-conspirators made materially false and misleading representations relating to HMNY’s and MoviePass’ business and operations to artificially inflate the price of HMNY stock and to attract new investors,” the DOJ statement continued. “At the time, Farnsworth was HMNY’s chairman and CEO. From November 2020 through September 2024, Farnsworth and his co-conspirators used the same strategy to defraud Vinco investors. Farnsworth also briefly served as Vinco’s CEO.”
The DOJ also stated that “Farnsworth and his co-conspirators falsely claimed that MoviePass’ ‘unlimited’ plan was tested, sustainable, and would be profitable or break even on subscription fees alone. However, Farnsworth knew that the ‘unlimited’ plan was a temporary marketing gimmick to attract new subscribers and, in turn, to artificially inflate HMNY’s stock price and attract new investors. In reality, MoviePass lost money from the ‘unlimited’ plan.”
Here comes the part that anyone who subscribed to the “unlimited plan” is well aware of…
“Farnsworth and his co-conspirators directed MoviePass employees to implement numerous tactics to prevent certain subscribers from using the purportedly ‘unlimited’ service to try to ease MoviePass’ cash shortfalls. These tactics included directing MoviePass employees to ‘throttle’ subscribers who most frequently used the service to buy movie tickets, thereby inhibiting their ability to use the MoviePass service.”
Ted Farnsworth, one of the key figures in the HBO documentary MoviePass, MovieCrash, now faces a maximum penalty of 20 years in prison for securities fraud and five years for conspiracy to commit securities fraud.
In February of 2024, former MoviePass executive, Khalid Itum, was found guilty of embezzling from MoviePass and its parent company. At least $260,000 of the money he stole was used to repay money he borrowed to produce an event at the Coachella music festival.