SEC Charges Recidivist for Defrauding Investors Via False, Misleading Statements
The U.S. District Court for the Southern District of New York entered a consent judgment on Dec. 30, 2024, against Theodore J. Farnsworth, former chief executive officer of Helios & Matheson Analytics Inc., or HMNY, for defrauding investors in Vinco Ventures Inc. – a purported digital media and content technologies company.
According to the U.S. Securities and Exchange Commission complaint, which was filed on Dec. 23, 2024, between at least January 2021 and April 2023, Farnsworth secretly controlled Vinco – in part through his control over certain Vinco officers and directors who Farnsworth hand-selected for their roles. The complaint alleges that Farnsworth sought to conceal his role at Vinco because he knew the SEC and the U.S. Department of Justice were investigating his conduct in connection with MoviePass Inc., a movie subscription company; and its parent company, HMNY.
As alleged in the SEC’s complaint, Farnsworth intended to merge a private entity he controlled, Zash Global Media and Entertainment Corporation, into Vinco, and authorized the issuance of press releases and filings with the Commission describing the planned combination of Vinco’s proprietary platform with Zash’s state-of-the-art analytics and distribution technology. However, according to the complaint, Farnsworth knew neither Zash nor Vinco possessed the platform or technology described. The complaint alleges Farnsworth drafted, reviewed, or approved false or misleading statements concerning the operations of two affiliated companies that exaggerated, among other things, the affiliated companies’ capabilities and Vinco’s expectations of the revenue the affiliated companies would generate. As alleged, Farnsworth extracted from Vinco millions of dollars for himself through his undisclosed control of the company.
Farnsworth consented to the entry of a judgment which provides permanent injunctive relief under Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and imposes an officer and director bar. The SEC’s complaint also seeks disgorgement, prejudgment interest, and civil penalties, which will be determined by the court at a later date, upon motion of the SEC.
Regarding MoviePass and HMNY according to the SEC’s complaint, between August 2017 and at least March 2019, Farnsworth and another defendant intentionally and repeatedly made misstatements in HMNY Commission filings, press releases, and in the press concerning key aspects of MoviePass’s business model. The misstatements concerned HMNY’s claim that MoviePass could be profitable at its new, $9.95-per-month subscription price; HMNY’s purported data analytics capabilities; and HMNY’s ability to fund MoviePass’s operations. As further alleged in the complaint, Farnsworth also devised fraudulent tactics to prevent MoviePass’s subscribers from using the service. In addition, the complaint alleges that, between January and April 2018, Farnsworth knowingly approved false invoices that a third defendant, a former MoviePass executive, submitted to HMNY and MoviePass, disguising bonus payments as services purportedly provided by an entity that the third defendant controlled. The litigation against the other defendants continues.
The SEC charged Farnsworth in September 2022 for making materially false or misleading statements concerning MoviePass and HMNY. In that action, Farnsworth agreed to the entry of a judgment providing permanent injunctive relief under Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, enjoining him from violating various other provisions charged in that complaint, and imposing a conduct-based injunction and an officer and director bar.
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