For those outside the US, Moviepass was a subscription service, launched in 2011, that allowed subscribers to purchase up to a movie ticket a day for a single monthly fee. The service utilized a mobile app. Users would check into a theater. choose a movie and showtime. The cost of the ticket would be uploaded to a MoviePass card which could then be used to purchase the ticket from the movie theater.
In 2017, the service was acquired by Helios and Matheson Analytics (HMNY) and the subscription cost was significantly lowered to $9.95 per month, with membership climbing to over three million subscribers by 2018.
This caused cashflow issues and eventually it was shut down in September 2019 with HMNY filing for Chapter 7 bankruptcy in January 2020.
Now two former leaders have been indicted on U.S. securities Fraud charges for allegedly deceiving investors.
Variety reports that Mitchell Lowe, the former CEO of MoviePass and Theodore Farnsworth, former CEO of parent company Helios & Matheson, have each been charged with securities fraud and wire fraud. This relates to assurances they gave investors that the subscription model had been market tested and would be sustainable over the long run.
The FBI’s New York field office has issued a statement :
“Attempted scams of this nature erode the public’s faith in our financial markets. The FBI is committed to ensuring these types of frauds and swindles are uncovered, and the perpetrators are held responsible for their actions in the criminal justice system.”
At the heart of the matter are false claims about AI and ‘big data’ being used to monetize subscriber information.
A former CDO friend of mine described Big Data as being like teenagers and sex. Everyone is talking about it. Everyone assumes everyone is doing it. Almost nobody is actually doing it, and those that are doing it are doing it really, really badly.
Previous MoviePass founder Stacey Parks, who sold the company, recently announced that it would relaunch with a new business plan.
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