SEC Files Fraud Lawsuit Against MoviePass Executives Mitch Lowe, Ted Farnsworth

The Securities and Exchange Commission has filed a lawsuit against former MoviePass executives Mitch Lowe and Ted Farnsworth, alleging the two made “false and misleading statements” about the shuttered movie ticket service’s profitability. The suit also names former MoviePass VP Khalid Itum for submitting false invoices.

Lowe, a former Netflix executive and president of Redbox, and Farnsworth, operating under MoviePass’ publicly traded parent Helios and Matheson Analytics, helped re-launch and market MoviePass, which at its peak had more than 3 million subscribers paying $9.99 monthly for unlimited access to a select number theatrical releases every 30 days. The populous concept quickly became financially unsustainable as MoviePass had to pay theatrical operators the face value for each ticket subscribers used.

Helios and Matheson Analytics filed for Chapter 7 bankruptcy protection on Jan. 28, 2020, but not before generating hundreds of millions of dollars in losses.

“Faced with debilitating negative cash flows — rather than tell the public the truth — Farnsworth and Lowe devised fraudulent tactics to prevent MoviePass’s heavy users from using the service, and falsely and misleadingly informed the public that usage had declined naturally or due to measures the company had employed to combat subscribers’ purported violations of MoviePass’s terms and conditions of service,” read the complaint.

Lowe’s lawyer, William McGovern, with the firm Kobre & Kim, disagreed with the suit’s wording and negative tone.

“We disagree with the SEC’s characterization of Mitch’s conduct, including allegations about statements made about the progress in building MoviePass,” McGovern wrote in a statement.

“Bringing new commercial concepts to the market can be disruptive and uneven. Mitch remains proud of what was accomplished at MoviePass and intends to work within the legal process to resolve these allegations.”

A spokesperson for Farnsworth said the complaint concerns issues publicly disclosed almost three years ago.

“Mr. Farnsworth continues to maintain that he has always acted in good faith in the best interests of his companies and shareholders,” spokesperson Chris Bond wrote in an email.

Adam Fee, a partner with the law firm Milbank, which is representing Itum, said the former VP has been unfairly targeted by the government in the complaint.

“Khalid is proud of the character and integrity he displayed throughout his time at MoviePass, and we look forward to challenging the SEC’s meritless allegations against him in court,” Fee wrote in an email.

Meanwhile, Farnsworth and Lowe reportedly settled a separate litigation complaint with the Federal Trade Commission and paid another $400,000 settlement with four California District Attorneys offices.

Ex-MoviePass Chairman Ted Farnsworth Joins Digital Media Company Vinco Ventures as Co-CEO

Vinco Ventures, a digital media and content technologies holding company, July 14 announced the appointment of Ted Farnsworth as co-chief executive officer alongside Lisa King, current CEO of Vinco Ventures. Farnsworth and King will lead the company as co-CEOs.

Farnsworth, who infamously attempted to bring the subscription revenue business model to theatrical movie industry through the short-lived MoviePass, resurfaced via his ZASH Global Media and Entertainment Company. ZASH recently merged with Vinco, and together with ZVV Media Partners, acquiring AdRizer and Lomotif — the latter helping users create social media videos.

The Vinco press release claims Farnsworth has “built many successful companies and is considered an expert in strategic development, marketing, public relations, consumer behavior and direct response marketing.”

Farnsworth exited MoviePass when the platform’s parent company, Helios and Matheson Analytics, declared bankruptcy in 2020 after blowing hundreds of millions of dollars of investor money, which led to litigation and a FTC complaint.

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“I speak for myself and the entire Vinco team when I say how thrilled we are to welcome Ted to management in an official capacity as co-CEO,” King said in a statement. “Vinco and ZASH have begun to streamline our businesses. With Ted as co-CEO, together, we can more efficiently execute on our strategic growth plans with a clear understanding of our Company’s combined vision and plan.”

A component to Vinco’s growth strategy is Lomotif in combination with AdRizer and Mind Tank, a short-form video platform Vinco claims drives user experiences with its interface and patented editing tools. By utilizing Lomotif’s mobile or web-based platform, Vinco says the platform’s ad and marketing tools can help drive engagement and grow revenue with premium content across its ecosystem.

Farnsworth and King face a challenging corporate relationship. Vinco ended its most-recent three-month fiscal period with a net loss of $379.1 million on revenue of $11.5 million. The company’s stock is trading around the SEC minimum $1 per share threshold.

MoviePass Founder Seeks to Create a ‘Virtual Hollywood’ With New Media Company

If Hollywood loves a comeback, Ted Farnsworth, former chairman of the corporate parent of the shuttered MoviePass theater subscription service, would appear to be first in line for the latest sequel.

Farnsworth’s Zash Global Media and Entertainment Corp., a content distribution company, Jan. 21 announced the signing of a merger agreement with Vinco Ventures to create “exciting acceleration” and growth in live-streaming content, video-sharing, distribution and production.

Ted Farnsworth

Farnsworth, together with media investor Jaeson Ma, an early investor in TikTok and the Triller video-sharing social platform, and social monetization executive Vincent Butta, aim to build a “virtual Hollywood,” providing content partners and producers with “state-of-the art” analytics and distribution technology.

Customized analytics is what Farnsworth and former MoviePass CEO Mitch Lowe sought to sell movie exhibitors when launching the $9.99 monthly all-you-can-watch theatrical pass. The too-good-to-be-true concept quickly gained 3 million subscribers and Wall Street backers before the reality of reimbursing theaters face value for tickets used by subscribers was a fiscal black hole. The service shuttered in 2019 after running out of money in 2018.

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But that was so yesterday. Brian McFadden, chief strategy officer, said Triller generated more than two billion views over a 30-day period on Facebook, adding the network has more than 350 million followers. The Triller app enables users to edit and synchronize videos to background tracks using artificial intelligence. TikTok recently sued Triller in a patent dispute.

“We are poised to revolutionize the next generation of video distribution,” McFadden said in a statement without elaborating.

Farnsworth said Zash was formed to “drastically reimagine” today’s global entertainment marketplace by combining “first-class talent,” resources and technology in this “dramatically changing” environment.

“We utilize data, meta data and the IoT [Internet of Things] to meet the ever-changing engagement and content demands of content developers, consumers and creators,” added Butta.

Ma said social interactive video platforms are taking over the minds of Gen Z and Y consumers. Live events are being transformed into virtual and augmented realities. Building direct-to-consumer brands through the influencer economy is the future of the e-commerce-driven marketplace, according to Ma.

“We now live in a digital world and there has yet to be a media and entertainment force to capture this disruption on all levels,” he said, apparently unaware of a company called Netflix, which ended 2020 with $30 billion in revenue, 203 million subscribers worldwide and a content production pipeline that is re-defining Hollywood.

Regardless, McFadden believes the combined companies and management will expedite scale of production and creative services to meet “growing content creation and distribution needs.”

“We are excited to merge with Zash in our ever-evolving pursuit to ‘be big,’” he said.

The news sent Vinco Ventures skyrocketing nearly 200% ($3) to close at $4.56 per share.

Ex-Helios and Matheson Analytics CEO Looking to Buy MoviePass Assets

Former Helios and Matheson Analytics CEO Ted Farnsworth just doesn’t know when to quit.

A day after stepping down as CEO of the parent to shuttered MoviePass ticket subscription service and related businesses (MoviePass Films, Moviefone), Farnsworth reportedly is cobbling together a group of investors to buy select MoviePass assets.

According to The Wall Street Journal, which cited HMNY internal documents, including Farnsworth’s resignation letter, the executive eyes continuing MoviePass Films, which generated several original releases starring Bruce Willis.

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Whether Farnsworth — a longtime MoviePass cheerleader along with the service’s CEO Mitch Lowe — would bring back MoviePass is unclear.

Launched in 2017, the $9.95 monthly ticket service offered subscribers daily access to a non-3D theatrical screening. At its peak, MoviePass had more than 3 million subscribers eager to take advantage of a business model that hemorrhaged money.

The service sought to make deals with exhibitors who were paid face value by MoviePass for every ticket used by subscribers in exchange for user data.

Chains such as AMC Theatres, Regal Cinemas and others wouldn’t bite, opting instead to launch competing ticket services.

Despite several attempts to re-invent the MoviePass business model, investors pulled the plug on HMNY shares — especially after two reverse-stock option split attempts.

Whether investors would line up behind Farnsworth for another edition of MoviePass remains to be seen. HMNY could also sell the assets to a third party.

MoviePass Reportedly Sinks to 225,000 Subscribers

MoviePass, the fiscally-challenged theatrical ticket subscription service, has reportedly shed about 90% of its peak of more than 3 million subscribers from June 2018.

According to BusinessInsider, which cited internal data obtained from the former high-profile service, MoviePass has generated just 13,000 new subs since launching an “uncapped” plan in February affording subs daily access to a theatrical screening for $9.95 monthly fee.

The new plan, which was a reboot of a previous price point that attracted 100,000 subs in 48 hours after launching in 2017, also enables MoviePass to throttle frequent users.

MoviePass owner Helios and Matheson Analytics disputes the subscriber tally, calling the data “incorrect” without elaboration.

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Regardless, the MoviePass business model paying exhibitors face value for every movie ticket consumed by subscribers remains financially unsustainable.

The service hemorrhaged hundreds of millions of dollars, sending HMNY stock into a nosedive. Company shares were delisted from Nasdaq earlier this year.

Stacy Spikes, who co-founded MoviePass in 2011, sold it to HMNY in 2017 and was fired from the company in 2018, told BusinessInsider the $9.95 price point was never intended to be permanent.

“[It was] thought of as a promotional thing, in a way celebrating HMNY buying us. But we hit 100,000 [subs] in 48 hours. So I’m like, ‘OK, turn it off. We reached our goal,’” Spikes said.

The executive concluded that $12.99 was the least MoviePass could charge, while a $75 option including Imax and 3D screenings was considered as well.

“But the overriding voice [at HMNY] was, ‘No, this is awesome, look how fast we’re growing.’ And it was this moment of ‘but $10.’ It doesn’t fly. Now the plane is falling,” Spikes said.

In fact, when HMNY CEO Ted Farnsworth and MoviePass CEO Mitch Lowe were photographed joyfully in front of an AMC Theatre on Times Square after surpassing 1 million subs, Spikes had a different reaction.

“That photo changed [MoviePass’] relationship in the marketplace,” he said. “The tone turned it more adversarial [with exhibitors]. Up to that point, MoviePass had been the underdog champion for going to the movies.”

Indeed, AMC Theatres, which had initially been supportive of MoviePass under CEO Gerry Lopez, became increasingly less so under new CEO Adam Aron.

Aron made it a point to repeatedly question the MoviePass business model on fiscal calls and in press releases – despite generating millions in revenue from MoviePass subs.

Last year AMC launched the AMC Stubs A-List subscription service, which has generated about 700,000 subscribers paying $19.95 monthly for access to three screenings weekly in any format.

AMC recently raised prices to $21.95 or $23.95 depending on the market subscribers live in.

Spikes says the initial success of MoviePass, AMC Stubs A-List and Cinemark’s service underscores market demand for a subscription business model.

“The good side was cinema had not been taken seriously since Netflix really got its footing,” he said. “So what I liked about that was this had risen to the zeitgeist of conversation. Seventy-five percent of [MoviePass] members were under the age of 26. Cinema was an event people cared about again. So while there is a sadness around the brand, I was happy to see that this is front and center.”

MoviePass Raises $6 Million in Funding

Helios and Matheson Analytics, the cash-strapped parent to MoviePass and MoviePass Films March 26 announced it has raised a $6 million in financing.

Helios plans to use the proceeds to accelerate MoviePass’ product development, fine tune its subscription technology, and increase MoviePass Films’ investment in new content.

In addition to working capital purposes, Helios will use the net proceeds to redeem approximately $870,000 of Helios’ outstanding non-convertible senior notes that were issued on Oct. 4, 2018 and Dec. 18, 2018, and to pay certain fees due to the placement agent and financial advisor and other transaction expenses.

“We are building the infrastructure, data and tools that we believe will power the next generation of MoviePass,” CEO Ted Farnsworth said in a statement. “We believe this new funding will allow us to double down on our development of transformative technology, while fueling our continued expansion.”

In connection with the financing, Helios agreed to convert the 60,000 shares of preferred stock to 1 million shares of common stock, among other stock warrants. As a result, each share of preferred stock is convertible into 16,667 shares of Helios’ common stock – or more than 666 million shares of common stock priced at a penny each.

The financing comes as Helios cited user fraud for ongoing financial challenges to its theatrical subscription ticket service MoviePass. The service has hemorrhaged hundreds of millions of dollars, contributing to Helios’ shares’ being delisted by Nasdaq.



MoviePass Parent CEO Says Fraud Undermined $9.95 Monthly Service

With MoviePass re-introducing its loss-leader $9.95 monthly service affording subscribers daily access to any non-3D/Imax theatrical screening, Ted Farnsworth, CEO of parent Helios and Matheson Analytics, says the service reboot won’t self-destruct like the last one.

In an interview with The New York Post, Farnsworth says the initial $9.95 unlimited plan launched in the summer of 2017 paying exhibitors face value for every ticket consumed by subscribers didn’t fail due to a flawed business model, instead fraudulent use of the plan contributed to the service hemorrhaging hundreds of millions of dollars.

Ted Farnsworth

According to Farnsworth, 20% of Movie Pass subscribers abused the service by acquiring tickets for friends and family not enrolled, binge-watching select movies and/or buying tickets just to go to the bathroom.

He said the abuse, which according to MoviePass resulted in the loss of “tens of millions” of dollars, won’t happen again due to new fraud-detection software installed in the system.

“It definitely would have been a different story if we knew last summer what we know now,” Farnsworth told The Post. “We never had anything in place so that we could test those systems. Right now, we know so much more, we’re so much smarter.”

Indeed, without exhibitors discounting ticket prices or engaging in revenue-sharing deals to reduce costs, MoviePass resorted to blacking out access to select titles in high-traffic theaters in New York and Los Angeles, among other cities.

That led to mass cancelations among the service’s 3 million subscribers.

MoviePass 2.0 now can check legitimate use by monitoring the sub’s location through the service’s app on a user’s smartphone. If the user watching a movie isn’t connected to the service through their phone, MoviePass will know about it.

“Now, if somebody goes to 15 or 20 movies [in a month], they’ll be flagged and then we monitor them to make sure that they are watching the movie,” Farnsworth said. “And if they are, that’s fine.”

While that type of legitimate subscriber nonetheless contributed to HMNY shares being delisted as investors fled the company, Farnsworth said the typical MoviePass sub watched 1.7 movies monthly, which included the fraud data.

“Even if you [limit ticket access] or took a movie out of opening weekend, the same [number] of people went to that movie,” he said. “You either see it today or you see it next week.”

MoviePass claims it has seen an 800% spike in new subscribers since bringing back the $9.95 plan on March 20.

“We wouldn’t have gone back to what we had originally if we weren’t prepared for it,” Farnsworth said. “We would have sat there with our cap plan, kept doing our thing, kept going along.”

HMNY shares closed March 22 up more than 6% to 1.2 cents per share – 98.8% below Nasdaq’s $1-per-share minimum.



MoviePass Parent Names Consultant as Interim CFO

Helios and Matheson Analytics March 22 announced the appointment of Robert Damon as CFO, replacing Stuart Benson, who resigned from the parent of the MoviePass theatrical ticket subscription service March 15 to take another job.

Benson’s departure followed the disclosure HMNY had incorrectly recognized about $5.9 million in revenue from MoviePass subscriptions that had been suspended.

Damon, who has worked as a consultant to HMNY for a year, was chief accounting officer for SFX Entertainment for three years through 2016. Previously,  he was Katz Media Group CFO for 17 years.

HMNY earlier this month revised its third-quarter net loss to $146.6 million — nearly 7% more than a loss of $137 million originally reported. For nine months of the fiscal year, HMNY lost $256.3 million, 3.8% more than a loss of $246.7 million.

CEO Ted Farnsworth and Benson said measures have been taken to avoid future accounting issues, including implementation of software upgrades to provide “real-time” information for managing and accounting for subscriptions, including subscriptions that are terminated or suspended.

“Members of the company’s management have discussed the matters with Rosenberg Rich Baker Berman, P.A., [HMNY’s] accounting firm,” Benson wrote in the filing.



MoviePass Restores $9.95 Daily Screening Plan

With senior management exiting and its parent’s stock de-listed, fiscally challenged MoviePass is bringing back the infamous daily theatrical access plan for $9.95 monthly that helped generate millions of subscribers — and generate hundreds of millions of dollars in losses.

Of course there’s a catch. Subscribers who pay upfront for a year get the same $9.95 rate MoviePass allows users to one theatrical screening daily. The rate increases to $14.95 on a month-to-month basis. MoviePass also offers a $19.95 plan with fewer screening limitations.

“We are — and have been — listening to our subscribers every day, and we understand that an uncapped subscription plan at the $9.95 price point is the most appealing option to our subscribers,” Ted Farnsworth, CEO of parent Helios and Matheson Analytics, said in a statement.“While we’ve had to modify our service a number of times in order to continue delivering a movie-going experience to our subscribers, with this new offering we are doing everything we can to bring people a version of the service that originally won their hearts.”

Whether the service can sustain the old pricing remains to be seen. MoviePass pays exhibitors face value for every screening subscribers attend. Without breaks on ticket fees or some sort of revenue sharing, MoviePass loses money when subs regularly go to the movies.


MoviePass Lost More Money Than Originally Reported

In another blow to fiscally-challenged theatrical ticket subscription service MoviePass, parent Helios and Matheson Analytics March 12 issued a revised financial statement revealing the service lost millions more than originally reported.

HMNY said its revised third-quarter (ended Sept. 30, 2018) net loss topped $146.6 million — nearly 7% more than a net loss of $137 million originally reported. For nine months of the fiscal year, HMNY lost $256.3 million, 3.8% more than a loss of $246.7 million.

HMNY attributed the error to overstatement of subscription revenue, including $700,000 of revenue from terminated MoviePass subscriptions by Costco; false recognition of about $5.9 million of revenue from certain suspended subscriptions that had not yet been consented to by subscribers.

The company also identified a non-cash error related to the accounting of derivative securities, which resulted in an understatement of net loss of approximately $2.9 million. HMNY said the error underscored a “material weakness” relating to subscription management.

CEO Ted Farnsworth and CFO Stuart Benson said measures have been taken to avoid future accounting issues, including implementation of software upgrades to provide “real-time” information for managing and accounting for subscriptions, including subscriptions that are terminated or in a suspended state.

“Members of the company’s management have discussed the matters with Rosenberg Rich Baker Berman, P.A., [HMNY’s] accounting firm,” Benson wrote in the filing.

HMNY, which had its stock delisted by Nasdaq for failing to meet the $1 minimum share value, has struggled to sustain the MoviePass business  model that enabled subscribers daily access to a theatrical screening for $9.95 monthly fee.