FRAUDENT BUSINESS MODEL
Many enterprises spend significant amounts of time and resources looking for the next great thing. In some instances the firm is able to create a new approach, a new way to do the same old thing or some other new and exciting wrinkle to a long standing convention. When the new way, thing or gizmo is invented the question is “How does the consumer know?” The best knew gizmo could also be the latest version of a fraudulent enterprise. So, the question becomes “How do investors know?” A recent case settled by the Commission presents this question – SEC v. Farnsworth, Civil Action No. 22-civ-08226 (S.D.N.Y).
The case is a previously filed action which named as defendant: Theodore J. Farnsworth, the former CEO of Helios & Matheson Analytics Inc. along with others. The complaint focuses on a two-year period beginning in August 2017. It alleges that during the period Defendant Farnsworth repeatedly issued false press releases regarding the business model for MoviePass. The statements were alleged to have misstated the key aspects of the business model for the firm.
At the center of the controversy was a claim that MoviePass could be profitable with a new $9.95 per month subscription price. In addition to creating the idea behind the offering, Defendant Farnsworth is also alleged to have a tactic which precluded the subscribers of MoviePass form using the service. In addition, Defendant had the company recognize revenue from false invoices. The complaint alleged violations of Securities Act Sections 17(a) and Exchange Act Sections 10(b), and 13(b)(5) and aiding and abetting violations of 13(b)(2)(A).
To resolve the action Defendant Farnsworth consented to the entry of a permanent injunction based on the Sections cited in the complaint. He also agreed to the entry of a conduct based injunction and an officer and director bar. Monetary remedies will be considered at a later date. See Lit. Rel. No. 26207 (Jan. 2, 2025).
FRAUDENT BUSINESS MODEL
Many enterprises spend significant amounts of time and resources looking for the next great thing. In some instances the firm is able to create a new approach, a new way to do the same old thing or some other new and exciting wrinkle to a long standing convention. When the new way, thing or gizmo is invented the question is “How does the consumer know?” The best knew gizmo could also be the latest version of a fraudulent enterprise. So, the question becomes “How do investors know?” A recent case settled by the Commission presents this question – SEC v. Farnsworth, Civil Action No. 22-civ-08226 (S.D.N.Y).
The case is a previously filed action which named as defendant: Theodore J. Farnsworth, the former CEO of Helios & Matheson Analytics Inc. along with others. The complaint focuses on a two-year period beginning in August 2017. It alleges that during the period Defendant Farnsworth repeatedly issued false press releases regarding the business model for MoviePass. The statements were alleged to have misstated the key aspects of the business model for the firm.
At the center of the controversy was a claim that MoviePass could be profitable with a new $9.95 per month subscription price. In addition to creating the idea behind the offering, Defendant Farnsworth is also alleged to have a tactic which precluded the subscribers of MoviePass form using the service. In addition, Defendant had the company recognize revenue from false invoices. The complaint alleged violations of Securities Act Sections 17(a) and Exchange Act Sections 10(b), and 13(b)(5) and aiding and abetting violations of 13(b)(2)(A).
To resolve the action Defendant Farnsworth consented to the entry of a permanent injunction based on the Sections cited in the complaint. He also agreed to the entry of a conduct based injunction and an officer and director bar. Monetary remedies will be considered at a later date. See Lit. Rel. No. 26207 (Jan. 2, 2025).