MoviePass under investigation for fraud by NY Attorney General
When we last checked in with the beleaguered MoviePass in August, the service was hemorrhaging users, having begun to limit them to up to six sometimes unknown movie choices per day of the three allotted each month. Parent company Helios and Matheson now has even more troubles, as CNBC reports that “according to a person familiar with the matter,” New York Attorney General Barbara Underwood is investigating them for fraud. From CNBC:
The attorney general’s office is investigating whether the company misled the investment community regarding the company’s financials, said the person. The investigation is in the early stages.
The attorney general is using the Martin Act, a statute designed to protect New York investors and the integrity of the financial markets from fraud.
“We are aware of the New York Attorney General’s inquiry and are fully cooperating,” Helios and Matheson said in a statement to CNBC. “We believe our public disclosures have been complete, timely and truthful and we have not misled investors. We look forward to the opportunity to demonstrate that to the New York Attorney General.”
Helios and Matheson are also facing a lawsuit filed by shareholder Jeffrey Braxton, Deadline reports. Braxton is seeking class action status for his suit, which alleges that “investors suffered losses because they were misled about the company’s business and its prospects.” It further argues, “MoviePass’ business model was not sustainable because there was no reasonable basis to believe MoviePass could monetize the model to a degree that could be maintained before being too buried in debt to survive.”
The once wildly popular, too-good-too-last MoviePass has been operating at a big loss for over six months, and stocks are down to two cents per share.