A $400,000 settlement was reached last month between executives of now-defunct MoviePass and prosecutors in four counties, according to Contra Costa County prosecutors.
The two executives, Theodore Farnsworth and Mitchell Lowe, allegedly engaged in unlawful business practices, according to prosecutors in Contra Costa, Sonoma, San Joaquin, and Ventura counties.
The two executives entered into a negotiated settlement agreement with county prosecutors on May 20 following allegations of unlawful, unfair, and fraudulent acts and practices as the two oversaw the MoviePass business.
Attorney Tina Sciocchetti of Nixon and Peabody, who represented Farnsworth and Lowe, said the settlement does not mean the executives admit to "any facts or violations of law that might be alleged."
MoviePass was a subscription-based movie ticket business based in New York City that initially gave people the opportunity to buy up to three tickets a month for a monthly fee.
Moviegoers checked into a theater using a cellphone app and picked a movie and showtime. The cost of the ticket was loaded by MoviePass onto a prepaid debit card, which was used to pay for admission to the movie.
According to prosecutors, the business model changed to an "unlimited" subscription plan for $9.95 per month and an "unlimited" annual subscription price when Helios and Matheson Analytics bought MoviePass in 2017.
But over the next two years, the business model and terms of service changed at least a few times and allegedly affected customers negatively, prosecutors said.
Among the alleged unlawful, unfair, and fraudulent acts and practices by Farnsworth and Lowe was false advertising. The pair said the service offered "unlimited" movie-watching consisting of "any movie" on "any day" at "any theater." But prosecutors allege MoviePass added limitations to subscriptions.
The pair also allegedly changed the terms of service during a subscription period, converted all "unlimited" prepaid plans to a limit of three movies per month, and among other things, continued to charge customers after they canceled their subscriptions.
In addition, prosecutors said MoviePass suffered a data breach in 2019 that affected at least 58,000 consumers. A company engineer had created an unsecured and unencrypted server for debugging, according to prosecutors.
The server had more than 161 million pieces of information on it such as names, MoviePass card numbers, and credit card numbers, prosecutors said.
MoviePass also allegedly failed to tell the California Attorney General's Office of the breach as the law requires.
MoviePass stopped doing business in September 2019, and it and Helios and Matheson Analytics filed for Chapter 7 bankruptcy in January 2020, prosecutors said.
Contra Costa County prosecutors got involved after a resident in 2018 filed a complaint against MoviePass with the state attorney general's office.
The resident alleged in the complaint that even though they paid for "unlimited" movies, the MoviePass app was showing only a limited number of movies and failing to show available tickets.
State prosecutors sent the complaint to Contra Costa County to investigate.