A former high-flying executive has found himself firmly grounded in a courtroom as Theodore Farnsworth, age 62, of Miami, pleaded guilty to orchestrating a securities fraud scheme preying on investors' hopes and resources. As reported by the U.S. Department of Justice, Farnsworth admitted to using false claims and deceptive promises to inflate stock prices of MoviePass’ parent company, Helios & Matheson Analytics Inc. (HMNY), and Vinco Ventures Inc.
Between August 2017 and March 2019, Farnsworth aggressively marketed an "unlimited" movie ticket subscription plan, which was purported to be profitable but was in fact designed solely to attract subscribers and unjustly inflate HMNY's stock price. The Department of Justice's Principal Deputy Assistant Attorney General Brent S. Wible described Farnsworth's actions as "repeatedly lied to the public to artificially inflate these companies’ stock prices, defraud investors, and enrich himself and his co-conspirators," according to the U.S. Department of Justice. Farnsworth also laid claims to utilizing artificial intelligence to monetize data which the company was collecting from MoviePass subscribers, despite the reality that such capabilities did not exist within the business model.
The deception didn't end with HMNY. According to a report by WSVN, a similar scheme was also carried out at Vinco Ventures, where Farnsworth and his associates manipulated stock prices for personal gain, all the while broadcasting misleading signals to investors. Farnsworth’s scheme brought promises of innovation and profiteering, but in fact, they were building castles in the air on the backs of investor capital.
In his guilty plea, Farnsworth has accepted the consequences of one count of securities fraud and one count of conspiracy to commit securities fraud. "Farnsworth’s ploys and boasts were actually lies and misrepresentations designed to boost stock prices," said Assistant Director in Charge James E. Dennehy of the FBI New York Field Office in a statement obtained by the Department of Justice. In acknowledgment of his actions, Farnsworth now potentially faces up to 25 years in prison—20 years for securities fraud and five years for conspiracy. A judge will be delivering the sentence after weighing the U.S. Sentencing Guidelines along with other statutory factors, and the sentencing hearing will be scheduled at a date yet to be determined.
This case marks a significant stance by legal enforcement agencies in addressing fraudulent activities in the securities market. The FBI New York Field Office is handling the investigation, while Trial Attorneys Lauren Archer, Kate McCarthy, and Matthew Reilly of the Criminal Division’s Fraud Section carry out the prosecution, with assistance from Trial Attorney Christopher Fenton of the same division.
