The SEC alleges that MoviePass executives lied about the service's profitability.
The former CEO of MoviePass and the former CEO of the majority stakeholder in the company are accused of making false claims to the public. Users were putting stress on an unsustainable business model when they lied about tripped security flags or being randomly selected for extra measures to stop them from using MoviePass.
Negative cash flows are faced with. MoviePass's heavy users were prevented from using the service.
The complaint says that MoviePass's heavy users were prevented from using the service and that they lied to the public.
The suit claims that MoviePass executive vice president Khalid Itum was involved in a number of deceptive tactics. According to the SEC, itum received $310,000 under false pretenses, including fraudulent expenses from itum's event production company Kaleidoscope, which staged MoviePass sponsored events.
MoviePass was claiming publicly that it had used data analytics and other methods to put itself on the path to self-sufficiency, but it was actually doing little research and bleeding money from its $9.95 subscription fee. The service would shut down after a fight with movie theaters.
The SEC wants monetary damages and a ban on Lowe and Farnsworth serving as officers or directors of any company with registered securities. MoviePass came back from the dead with higher prices and only three test markets.