Ted Farnsworth, the former CEO of MoviePass, has pleaded guilty to securities fraud and conspiracy to commit securities fraud, facing up to 25 years in prison. The Department of Justice announced the plea, stemming from Farnsworth’s misleading claims about the financial stability and data monetization capabilities of the troubled subscription service.
MoviePass, originally founded by Stacy Spikes as a more modest subscription service, gained notoriety under Farnsworth’s leadership at Helios and Matheson, the analytics firm that acquired a majority stake in the company in 2017. Farnsworth introduced the now-infamous $9.95 unlimited movie plan, attracting over three million subscribers.
This seemingly attractive offer quickly proved unsustainable. Despite Farnsworth’s public pronouncements of profitability based on subscription fees and customer data sales, MoviePass began hemorrhaging money. The company implemented cost-cutting measures such as blackouts on popular films, leading to service outages and frequent changes to pricing and plans.
The Department of Justice revealed that Farnsworth knowingly misrepresented the financial health of MoviePass to investors. Furthermore, his claims regarding the monetization of subscriber data through his analytics company were found to be false. In reality, MoviePass lacked the capabilities to generate revenue from customer data, relying solely on subscriptions, which were bleeding the company dry. Farnsworth even directed employees to throttle user access to limit their usage of the unlimited plan.
After driving MoviePass into bankruptcy, Farnsworth allegedly repeated this pattern of deception with another company, Vinco Ventures. The DOJ alleges that Farnsworth and his co-conspirators misled investors about the company’s financial standing while diverting funds for personal gain.
Farnsworth’s sentencing is scheduled for later this year. MoviePass has since returned to the ownership of its founder, Stacy Spikes, and has reportedly achieved profitability, though users continue to report ongoing technical issues and glitches.
