A former CEO of MoviePass’ parent company has admitted to committing a major securities fraud and conspiracy. Theodore Farnsworth, once the chairman and CEO of Helios & Matheson Analytics Inc. (HMNY), the company behind MoviePass, has pleaded guilty to charges that he misled investors and inflated the stock price of his companies. This case sheds light on a long-running scheme that used lies and false claims to deceive the public and make money at the expense of investors.
The Fraudulent MoviePass “Unlimited” Plan
In 2017, MoviePass, a company that allowed people to watch multiple movies a month for a single, flat fee, introduced an “unlimited” movie plan. This plan promised customers they could watch as many movies as they wanted for just $9.95 a month. However, Farnsworth and others involved in the scheme knew that this plan wasn’t sustainable. They falsely claimed that it had been tested and would make money or at least break even. In reality, it was a temporary marketing trick designed to attract new customers and artificially boost HMNY’s stock price.
MoviePass was losing money quickly from the “unlimited” plan, but Farnsworth continued to mislead investors by claiming that the company’s subscription model was working and that it would become profitable. He also made false statements about how MoviePass was using new technologies, such as artificial intelligence, to generate revenue from subscriber data. Farnsworth claimed HMNY was using this technology to make money off the data it collected from customers, but this was also a lie. There was no such technology in place, and the company never had the capabilities to monetize this data.
False Claims About Revenue and Profits
Along with making misleading claims about MoviePass’s subscription plan, Farnsworth and his team also falsely said that MoviePass had other revenue streams besides ticket sales. They claimed these streams would help make the company self-sufficient. However, the truth was that MoviePass did not have any other significant sources of income to offset its heavy losses. Farnsworth kept up this false story to attract more investors and inflate the company’s stock price, even though he knew that MoviePass was losing money and would not be able to sustain its business model.
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Even more troubling, Farnsworth and his colleagues directed MoviePass employees to prevent certain subscribers from using the “unlimited” plan too much. They ordered staff to “throttle” frequent users, which meant limiting the number of tickets they could buy. This was done to try to reduce the company’s expenses, but the public was never told about these actions. Farnsworth and his team continued to misrepresent the business’s operations, making it appear as though MoviePass was profitable and growing when, in reality, it was struggling.
Deceiving Vinco Investors
After MoviePass, Farnsworth moved on to another company, Vinco Ventures, and continued his deceptive practices. From November 2020 to September 2024, Farnsworth and others used the same tricks to inflate Vinco’s stock price. They made false statements about the company’s business to mislead investors and attract more money. Just like with MoviePass, Farnsworth and his partners took steps to hide the truth about their operations and used the proceeds for their personal gain.
The FBI’s investigation into this case found that Farnsworth and his co-conspirators worked together to mislead both investors and the public, causing significant financial harm. Farnsworth’s actions were part of a scheme to artificially raise stock prices and defraud people who believed in the companies he led.
Farnsworth has now pleaded guilty to two serious charges: securities fraud and conspiracy to commit securities fraud. He faces a maximum sentence of 20 years in prison for the fraud charge and up to five years for the conspiracy charge. A federal court judge will decide his sentence after considering the facts of the case.
This case serves as a reminder of the importance of honesty in business, especially when it involves public companies and the hard-earned money of investors.
