MoviePass founder pleads guilty to defrauding investors

Posted On January 8, 2025January 8, 2025

Ted Farnsworth, the founder of MoviePass, a $9.95 subscription service with a failed business model, has pled guilty to defrauding the company’s investors.

Farnsworth pleaded guilty to the charges on January 7th. He also pleaded guilty to conspiracy charges for another scheme involving a video-sharing platform that didn’t exist. The government alleges that he secretly organised the non-existent video-sharing platform scheme while he was under initial investigation for the MoviePass case.

Farnsworth has been held in detention since his $1million bond was initially revoked in August 2023. His defence attorney, Sam Rabin, said the court should consider this favourably. “It was important for Mr Farnsworth to accept responsibility for his conduct,” he said, “And he took the first step by entering a guilty plea this day.” 

The MoviePass founder was initially indicted in November 2022. He was accused of lying to investors about the company’s revenue streams, sources and sustainability. Farnsworth has been charged with several offences. A parallel case filed by the Securities and Exchange Commission was settled on December 27th. The outcome was that Farnsworth was banned from serving as an officer of a publicly traded company. 

MoviePass initially expanded in 2017. At its peak, three million users subscribed to its all-you-can-watch movie subscription service. However, it lost hundreds of millions of dollars and was forced to declare bankruptcy in 2020. The company’s financial model was unprofitable, but both Farnsworth and Mitchell Lowe, the CEO of MoviePass, claimed that it would be able to profit by leveraging customer data.

While Farnworth remained adamant the platform could be profitable, behind the scenes, the company was taking action to try to throttle the service. They did this by forcing high-volume users to reset their passwords and also verify their ticket purchases.

Once this information came to light, Farnsworth was initially charged with securities fraud and three separate counts of wire fraud. The government added to this recently by filing a superseding complaint last month that saw Farnsworth accused of conspiracy to commit securities fraud and securities fraud.

The first plea of conspiracy to commit securities fraud pertains to a separate scheme to MoviePass, as Farnsworth was found to be involved with another publicly traded company, Vinco Ventures. According to a complaint filed by the SEC, Farnsworth was secretly in charge of this company that had managed to raise $120 million between 2021 and 2023. The company was an alleged media distribution platform, and in raising such a substantial amount of money, Farnsworth took out millions for himself.

Since declaring bankruptcy, MoviePass has relaunched with different ownership and a completely different business model.

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