As a gamer with a keen interest in business models and their ethical implications, I find myself deeply disillusioned by the case of Mitch Lowe and MoviePass. The deception that took place behind the scenes is not just a letdown for investors, but it tarnishes the trust that companies like MoviePass should build with their customers.
As a passionate cinephile and ex-chief executive of MoviePass, I’ve admitted my guilt regarding a securities fraud charge connected to misleading investors about our monthly film subscription service.
On Monday, Lowe admitted guilt as part of a plea deal regarding his role in inflating MoviePass’ stock price by falsely claiming the profitability and longevity of their $9.95-per-month unlimited plan. In return, securities and wire fraud charges against him were dropped. He could serve up to five years in prison, but considering his cooperation with ongoing investigations and cases, he is likely to receive a lighter sentence. Additionally, he may be fined up to $250,000 or twice the amount he gained from the alleged scheme.
Mitch’s legal representatives, Margot Moss and David Oscar Markus, stated that he aims to progress in life. He acknowledges the errors he made in this situation and is committed to rectifying them moving forward.
In 2022, federal prosecutors in Florida filed a lawsuit against Ted Farnsworth, CEO of Helios and Matheson Analytics (who acquired MoviePass in 2017), Khalid Itum, a business executive for the company, and another individual named Lowe. The lawsuit accuses Lowe of making deceptive statements about MoviePass’s monthly subscription service. These false claims included assertions that the service would be profitable or at least break even based on subscription fees alone, and that the number of movie tickets being purchased by subscribers was decreasing, among other things.
It is claimed that Lowe and Farnsworth were aware that MoviePass was running at a loss due to a marketing trick designed to increase subscriber numbers. Reportedly, the company deliberately hindered users from fully utilizing the service. As per the indictment, employees were instructed to slow down high-activity subscribers.
Regarding speculations that AMC suggested MoviePass would need to reduce prices, Lowe dismissed this idea, claiming, “They don’t grasp our business strategy.” Prosecutors pointed out numerous instances where he boasted about the durability of their plan in media interviews and financial reports, allegedly with the intent of artificially boosting the company’s share value.
Following Lowe’s sentencing for his memoir detailing the up and down story of MoviePass, prosecutors have chosen to withdraw securities and wire fraud charges that could have resulted in 20 years imprisonment per count. As outlined in the plea agreement, the government initially believed the scheme caused over $300 million in damages but agreed to reduce this amount to $25 million for sentencing purposes as part of the negotiated deal.
The Securities and Exchange Commission is persistently investigating a case against Lowe, accusing him of breaking federal securities laws related to essential elements of MoviePass’s business structure. The accusations claim that Lowe intentionally authorized fraudulent bills which masked bonus payments as services supplied by a company named Itum under his control.
Farnsworth faces a trial scheduled to start next year.
In 2021, Lowe, Farnsworth, and Helios and Matheson reached a settlement with the Federal Trade Commission over allegations of misleading marketing strategies and restricting users from accessing their platform. As part of the agreement, they are prohibited from making false claims about their business practices and data security, and must establish robust security programs for any future business ventures.
In February, a jury declared Itum guilty for two charges of fraud involving wire transactions, stemming from his embezzlement of over $260,000 from MoviePass. This money was used to repay debts he had accrued while funding a festival party at the Coachella Valley Music and Arts Festival in 2018.
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2024-09-17 01:54