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MoviePass’ owner emerged from Indian company accused of massive fraud



helios matheson mitch lowe ted farnsworth
From left: MoviePass CEO
Mitch Lowe, actor John Travolta, and HMNY CEO Ted

Getty / Dave Kotinsky /

  • Helios and Matheson Information Technology (HMIT), a
    defunct Indian tech company, stands accused in its home country
    of defrauding 5,000 or more creditors, including banks and
    senior citizens.
  • Helios and Matheson Analytics (HMNY), the owner of
    popular movie-theater subscription service MoviePass, was
    created by HMIT over a decade ago, after HMIT bought and
    renamed a New York consulting firm.
  • HMNY’s CEO Ted Farnsworth downplayed the connection
    between the two companies to Business Insider, but at least two
    veteran HMIT executives occupy high-level positions at the
    MoviePass owner.
  • HMIT owned around 39% of HMNY in 2016, but that
    percentage has dwindled to less than 1% this year, primarily
    due to dilution. Still, in November 2017, HMIT managed to cash
    out 170,000 shares of HMNY stock worth about $2.2 million at
    the time.
  • Muralikrishna Gadiyaram, HMIT’s CEO who signed the
    November stock sale, is still on the board of the New York
    company (HMNY) despite being accused of fraud in India, and
    having his and HMIT’s bank accounts frozen there.
  • In March of 2018, the State Bank of India accused HMIT
    of using Maurthi Consulting, another company it acquired in the
    2000s, to siphon money out of India with the “evil intention of
    defrauding our bank,” in a complaint to India investigators.
    The cofounder of Maurthi Consulting, Parthasarathy “Pat”
    Krishnan, is currently chief innovation officer at


“See the light,” a corporate slogan, flickers on the website of India’s
Helios and Matheson Information Technology
(HMIT), even now
that the company’s telephones have dropped out of service, and
its email inboxes spit back inquiries with a message: “Address
not found.”

It continues there as thousands of creditors await the money
promised to them years ago. Many have lost faith it will ever
arrive. They saw the light too late.

In India, HMIT stands accused of defrauding 5,000 or more
creditors, including banks and senior citizens. Civil lawsuits
and government investigations involving the company continue in
multiple venues in the country.

But in the US, Helios and Matheson Analytics (HMNY), a company
born out of an HMIT acquisition that still has strong links to
some executives who led the Indian company, is selling a
different story, that of the moving picture and the silver
screen. It’s the owner of MoviePass, a name that has become
synonymous with a tidal wave of disruption in the movie-theater
business, and has drawn the ire of giants like AMC Theatres.

In a recent interview with Business Insider about MoviePass’
general financial situation, HMNY CEO Ted Farnsworth downplayed
the connection between the two Helios and Mathesons. (Farnsworth
did not respond to direct requests for comment in connection with
this story.)

“I don’t deal with HMIT at all,” Farnsworth said in the
interview. “Don’t even know all the players of it. Never met

But according to documents filed with the Securities and Exchange
Commission, HMIT’s CEO, Muralikrishna Gadiyaram (aka GK
Muralikrishna), currently sits on HMNY’s board of directors, and
is paid more than $18,000 a month in consulting fees by the
MoviePass owner. HMIT’s former CTO, Parthasarathy “Pat” Krishnan,
is listed as one of four leaders in HMNY’s “management” section of its
corporate website, with the title of “chief innovation officer.”

When asked a second time if HMIT was currently involved in HMNY’s
business, Farnsworth responded: “Not HMIT, no, I can’t even
pronounce all their names.”

That may be so, but the connection between the companies is
instructive. To fully understand HMNY, MoviePass, and how the
popular movie-theater subscription service has been able to
offset its heavy losses through the sale of millions of shares,
you have to understand where it came from. You have to go back to
the beginning, on the southeast coast of India.

helios nasdaq
Muralikrishna Gadiyaram (second from left) and Ted
Farnsworth (fourth from left)


Allegations of massive fraud

Helios and Matheson started in 1991 as an information technology
training firm in Chennai, the capital of the Indian state of
Tamil Nadu. The company went public in 1999, and shortly
thereafter went on a buying spree, snapping up five companies in
the US and India between 2001 and 2007, expanding into different
areas of IT. One of those companies, The A Consulting Team (TACT)
— which had been listed on the Nasdaq since 1997, and HMIT
acquired in 2006 — would be renamed Helios and Matheson Analytics
(HMNY) and later buy MoviePass.

Corporate ratings firm CRISIL described HMIT, in a 2014 report,
as a “mid-sized global provider of IT services.” At the time,
HMIT said its customers were primarily in financial services (37%
of revenue in 2013), healthcare (24%), and tech (22%).

HMIT raised millions by issuing “fixed deposits,” similar to
certificates of deposit in the US. For these fixed deposits
(FDs), a depositor would lend HMIT money and be given a
post-dated check, with interest, meant to be cashed when the FD
reached maturity.

It’s unclear when exactly HMIT began to offer these FDs to the
public, but according to Alok Jain, an HMIT depositor and lawyer,
who has been helping others track the various legal cases, the
company paid back the principal and interest on them without
issue until June 2014.

Then HMIT suddenly stopped paying many creditors back. Why? HMIT
told the Indian government that a law change prevented it from
getting money from new depositors to pay back ones that had
previously lent the company money. Jain suspects that this law
change broke a cycle of money that sustained the company.

Jain goes as far as to conjecture that HMIT may have been a Ponzi
scheme, pointing out some similarities: “The manner in which this
company has functioned seems to be a Ponzi scheme the way it
lured depositors with high interest rates, maintaining a
continuity of timely interest payments and leading the investors
to part with more money sensing the high returns,” Jain wrote in
a recent summary of HMIT’s pending cases. “Finally it folded up
and packed its bags leaving the investors in a lurch.”

Though the court cases and complaints reviewed by Business
Insider have not claimed HMIT was a Ponzi scheme, several
entities have formally alleged fraud, including the State Bank of

The bank alleged — in a complaint to India’s Central Bureau of
Investigation in March, asking it to register a criminal case —
that HMIT committed a “serious fraudulent act” and siphoned money
from a loan out of India. The bank characterized HMIT and some of
its officers as “well-organized offenders.”

helios and matheson logoHelios
and Matheson

“Due to a sudden change in law…”

Things started to go wrong for HMIT financially in 2013, when the
Indian government passed a change to the laws governing the FDs
it was issuing. Suddenly, there were stricter conditions on how
HMIT could issue FDs, including insurance and rating
requirements. When those changes began to go into effect in 2014,
HMIT sent letters to depositors requesting that they not cash
their checks. In those letters — copies of which Jain provided to
Business Insider — HMIT blamed “accelerated changes in law” for
its instructions to bankers to stop payment on post-dated checks.

HMIT didn’t have the money to pay them back, it said.

Gadiyaram, HMIT’s CEO, explained the company’s financial troubles
in more detail in a letter to the deputy registrar of companies
for Chennai, dated August 1, 2015.

“Due to a sudden change in law relating to acceptance of fixed
deposits, effective April 01, 2014, we are not in a position to
accept fresh deposits pending certain conditions to be complied
with as per The Companies Act 2013,” Gadiyaram wrote in the
letter, a copy of which was reviewed by Business Insider. “This
has resulted in liquidity tightness compromising our ability to
meet redemption demand.”

In simpler phrasing: Because of stricter requirements, HMIT
couldn’t find new depositors, and so couldn’t pay back its old
depositors. To Jain, who believes that HMIT may have functioned
like a “Ponzi scheme,” this was likely the spark that caused it
to blow up.

At the close of the 2015 letter, Gadiyaram expressed optimism
that HMIT would be able to get its house in order and soon be
able to “accept fresh fixed deposits and this inflow would also
be available to repay the matured FDs.” It would find new
depositors and pay its debts.

Those future repayments never happened, Jain told Business

3 arrests and thousands of angry creditors

Since HMIT stopped paying back large swaths of its creditors in
2014, multiple civil lawsuits have been brought against the
company in India, and investigations by both police and
regulators have been opened after allegations of fraud.

Three of HMIT’s company officers were arrested in 2015, including
Gadiyaram, after a specific allegation of not paying back a
creditor. (The arrests were referenced in court documents
obtained by Business Insider.)

In 2016, a judge in Chennai ordered the liquidation of HMIT and
its assets to pay back creditors. The judge slammed HMIT for
making a “deliberate attempt to hoodwink” court orders and wrote
that, in the court’s opinion, a “vast amount may have been
stashed away” by HMIT. The court later granted HMIT an interim
stay to settle its debts.

But according to Jain, HMIT has not made any significant progress
in paying back depositors.

Since the liquidation order in 2016, the various legal cases and
investigations have dragged slowly through different venues in
India, and are still not concluded. On its website, the Economic
Offences Wing (EOW) of the Tamil Nadu police currently lists HMIT
as “under
.” Jain estimated that the number of depositors
waiting for their money is between 5,000 and 7,000, many of whom
are senior citizens.

In May 2018, after years of legal trouble, HMIT was
kicked off India’s two national stock exchanges
— the
National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE)
— because it was under liquidation.

The phone number listed on HMIT’s website for its corporate
headquarters was not in service, and emails to the HMIT address
designated for press inquiries bounced back. Gadiyaram could not
be reached by other methods. HMNY did not respond to multiple
requests for clarification of Gadiyaram’s involvement in the
company, and declined to furnish Business Insider with working
contact information for him.

The US business keeps rolling

While HMIT was starting to unravel in India after the 2014 law
change, its US subsidiary, HMNY, headquartered in New York’s
Empire State Building, remained unscathed.

Still, there were big changes at the New York company in early
2016, a few months after the liquidation order came down in
Chennai for its Indian parent company.

In March 2016, the CEO of HMNY, Divya Ramachandran, resigned.
Divya Ramachandran is the daughter of V. Ramachandran, who is the
former chairman and cofounder of HMIT in India and was one of
those arrested in Chennai in 2015.

In filings with the SEC, HMNY did not give a reason for Divya
Ramachandran’s resignation, except to say that it was not
“because of any disagreement on any matter relating to the
company’s current operations, policies or practices.”

Following her resignation, Parthasarathy “Pat” Krishnan took over
as CEO of the New York company. Krishnan had been involved in
Helios and Matheson since 2005, when HMIT bought a
California-based firm he cofounded, Maurthi Consulting Inc.,
which claimed clients like and Delta Dental. His
consulting firm was one of the five companies HMIT picked up
during its buying spree in the early 2000s, which also included
TACT, the company that would be renamed HMNY and later buy
MoviePass. After the acquisition of Maurthi Consulting, Krishnan
had become CTO of HMIT as a whole.

Though Maurthi Consulting is based in the US, it has recently
been dragged into HMIT’s legal drama in India. In the March 2018
complaint to India’s Central Bureau of Investigation, the State
Bank of India accused HMIT of using Maurthi Consulting to siphon
money out of India with the “evil intention of defrauding our
bank.” The bank alleged that, in doing so, HMIT committed the
offenses of “cheating, criminal conspiracy, forgery, criminal
breach of trust, etc.”

Krishnan did not respond to multiple requests for comment from
Business Insider, and HMNY declined to make him available for an
interview. HMNY declined to provide contact information for Divya

A Miami penny-stock guru takes over

Krishnan’s 10-month tenure as CEO of New York’s HMNY, starting in
March 2016, served mostly as a set-up for a merger that would
fundamentally remake the company, and catalyze the acquisition of

In a deal completed in November 2016, HMNY merged with a tech
company called Zone Technologies, run out of Florida by Ted
Farnsworth. Farnsworth had quite a business history himself.

According to the Miami Herald
, “over the past three decades,
Farnsworth has registered more than 50 different companies in
Florida, including energy drink ventures, a hotel group, and a
video company” — not to mention “a psychic hotline that featured
La Toya Jackson as a spokeswoman.” He also had a history of
penny-stock “wipeouts
detailed by Bloomberg.

Zone’s primary business at the time was developing RedZone Maps,
described in SEC filings as “a GPS-driven, real-time crime and
navigation map application,” the idea for which came to
Farnsworth on a trip to Israel. The private company had zero
revenue and $1.5 million in expenses from the start of 2016 until
the November acquisition. (In March 2018, HMNY announced a plan
to spin off Zone into a separate company.)

HMIT and Farnsworth came out of the 2016 merger on equal footing,
with both owning about 39% of the combined company, which
continued doing business as HMNY. Farnsworth originally became
chairman of the board before taking over the CEO spot in January
2017. Krishnan stayed on as chief innovation officer, a position
he still holds.

With these moves, HMIT in India had begun to extricate itself
from the US business, and Farnsworth said its leadership hadn’t
been involved in HMNY since he took over.

“They have no say, they have no say in whatever we do from that
standpoint,” Farnsworth told Business Insider. “I don’t deal with
HMIT at all. I never have since I took over.”

Farnsworth did acknowledge that Krishnan was still part of HMNY.

“Pat is out of San Francisco,” Farnsworth said. “He does
programming and all that stuff.” Farnsworth asserted that
Krishnan “wasn’t a part of HMIT,” though SEC filings and
Krishnan’s LinkedIn page indicate he sold his company to HMIT and
then served as HMIT’s CTO from 2006 to 2013.

HMNY did not respond to follow-up requests for clarification from
Business Insider.

redzone screenshot
A screenshot from
RedZone’s website


Buying MoviePass and $45 million per month in losses

In the summer of 2017, a few months after becoming CEO,
Farnsworth launched a headline-grabbing plan to completely
reorganize HMNY around a marquee acquisition of MoviePass.
MoviePass was a venture-backed startup founded in 2011 with the
goal to bring a Netflix-like subscription model to movie
theaters. Its tiered pricing system — which spanned from $15 to
$50 — hadn’t done much to disrupt the industry.

In August 2017, HMNY announced it had entered into an agreement
to buy a majority stake in MoviePass (which it has since
increased to 92%). But HMNY didn’t want to just buy MoviePass, it
planned to radically alter its business model.

Under the leadership of Farnsworth and MoviePass CEO Mitch Lowe,
a veteran of both Netflix and Redbox, the service dropped its
plan to $9.95 to see a movie per day in theaters. This change
sent shockwaves through the industry, with many observers,
including the CEO of AMC Theatres, publicly questioning how
MoviePass could ever turn a profit at such a price point.

The answer, so far, has been that it hasn’t. As MoviePass’
subscriber base has ballooned to over 3 million, so have its
losses. The company had an average monthly cash deficit of $23
million in the first quarter of 2018, which rose to $40 million
in May, and an estimated $45 million for both June and July.

The listing of HMNY on the Nasdaq has been a key to keeping the
company afloat as its losses have multiplied. HMNY has flooded
the public market with millions of shares to fund its losses,
greatly diluting shareholders and sending its stock price
plummeting. On July 23, shareholders of HMNY approved
authorization to increase the number of outstanding shares by a
magnitude of 10, up to 5 billion.

In recent months, HMNY has tried to bring its cash burn under
control by introducing MoviePass features like surge pricing and
stopping repeat viewings of the same movie. But HMNY warned in
June it could need to raise up to $1.2 billion in fresh capital
to keep MoviePass going.

That would be a tall order if HMNY were to be kicked off the
Nasdaq, which could happen December 18 if HMNY doesn’t come back
into compliance by lifting its stock price above $1 per share,
with a market cap of $50 million.

Presumably to help stave off that fate, on Tuesday, July 24, HMNY
enacted a 1-for-250 reverse stock split, rocketing the share
price from nine cents to $22.50. The share price didn’t stay
there for long, however, falling to $13 almost immediately when
it started trading on Wednesday. On Friday, the stock was dropped
under $4 per share, after HMNY
disclosed that a Thursday service outage had been caused by cash
flow problems

Even if HMNY can fix its Nasdaq problem, that doesn’t mean it
will be able to cover gargantuan losses indefinitely.

“Their real challenge is how they are going to attract
substantial amounts of cash to finance their business model and
stay in business, and that means new cash,” Erik Gordon, a
clinical assistant professor at the University of Michigan’s Ross
School of Business,
told Business Insider
. “Who is going to come in and give you
$100 million? That’s the hard part.”

But despite the dilution and the heavy losses, there are still
HMNY loyalists left among its investors.

“You’re fighting the regime just like Trump came in to drain the
swamp,” an HMNY investor said in a shareholders meeting in New
York on July 23. “You’re fighting the regime. And everybody jumps
on board and is ready to bash you. But you’re really doing a good
thing for the consumer.”

moviepass business insiderBusiness

Missing millions and disputed leadership continuity

As the MoviePass acquisition has remade HMNY, its relationship to
its former Indian parent company has changed.

While HMIT owned around 39% of HMNY following the Zone merger and
introduction of Farnsworth in 2016, that percentage has dwindled
to less than 1% today, primarily due to dilution. Still, in
November 2017, HMIT managed to cash out 170,000 shares of HMNY
stock worth about $2.2 million at the time.

The question of where that $2.2 million went remains open. Around
March 2018, representatives from the EOW of the Tamil Nadu police

told The Times of India
that Gadiyaram’s bank accounts had
been frozen, and 2016 court documents viewed by Business Insider
reference that the EOW had frozen accounts of HMIT.

“No one has any idea where the proceeds of the sale of HMIT stake
in HMNY have gone,” Jain said. “Possibly one of the many
subsidiaries. Or to pay some banks. Honestly, no clue.”

Though HMIT has a much smaller stake in HMNY now, two former
executives continue to play a part at the MoviePass owner.
Gadiyaram currently sits on HMNY’s board of directors, and is
paid a consulting fee of $18,750 per month in cash, per a 2-year
contract signed in October.

Krishnan is listed as the chief innovation officer for HMNY on
its corporate website.

Combined, they made over $10 million in cash and stock from HMNY
in 2017, though the value of their shares has cratered as the
stock price has dropped. In cash alone, Gadiyaram made $206,250
and Krishnan $225,500 in 2017, according to HMNY’s annual report.

And it has been HMNY’s presence on the Nasdaq, a presence that
traces its roots to TACT’s first listing on the exchange in 1997,
years before Helios and Matheson bought it and expanded to the
US, that’s allowed Farnsworth to cover hundreds of millions in
MoviePass losses by selling new shares of stock to the public.

But Farnsworth has gone to great pains to distance his company
from not only its roots, but its current connections.

In the shareholders meeting on July 23, when asked specifically
about the allegations of fraud against Gadiyaram — who is a
current board member and was also dialed into the meeting
remotely, but didn’t speak — Farnsworth did not answer directly,
instead pivoting to talk about HMIT generally, and minimizing its
role in HMNY.

“They are strictly an investor,” Farnsworth said, presumably
referring to HMIT and disregarding the question asked about
Gadiyaram. “They own less than half a percent — not even — right
now. They are strictly an investor, so [the] SEC didn’t have any
issues with it, all disclosed stuff. And you know, it’s no
different than a fund investing with you, and they were a funder
way back when, 20-some years ago.”

Farnsworth’s main point appeared to be that because the SEC has
not taken any action, he wasn’t concerned — and by extension,
that investors shouldn’t be concerned either. But HMIT was not
simply a funder “20-some years ago.” The Indian company
controlled its US subsidiary until 2016, its CEO currently
retains a board seat, and its former CTO is the MoviePass owner’s
chief innovation officer.

SEC documents show that the handover of power in HMNY went
straight from India-based HMIT to Farnsworth.

Why is he working so hard to give the impression he has no idea
who they are?

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