A former MoviePass executive was arrested Tuesday on charges that he embezzled $260,000 from the company to pay for a party at Coachella Music Festival.
Khalid Itum, 42, was indicted on two counts of wire fraud and two counts of money laundering. The charges allege that Itum submitted sham invoices to MoviePass to pay for the marketing event, which he had run through a separate company that he owned and controlled.
MoviePass collapsed in 2019, after losing hundreds of millions of dollars on its all-you-can-watch theatrical subscription business. Last November, the two top executives — Theodore Farnsworth and Mitch Lowe — were indicted on securities fraud charges for allegedly deceiving investors about the sustainability of the business.
Farnsworth, Lowe and Itum were also accused in a civil complaint from the Securities and Exchange Commission in September. The SEC complaint first leveled the allegation about Itum and the Coachella party.
In defending the SEC charges, Itum’s lawyers have argued that the Coachella event in 2018 was intended to raise MoviePass’ profile. His lawyers have also said that MoviePass executives paid Itum’s company, Kaleidoscope, to put on the event because it was outside his ordinary duties.
Federal prosecutors allege that neither MoviePass nor its parent company, Helios and Matheson Analytics, participated in the Coachella event. They also accuse Itum of lying to the company’s auditor and claiming that the money was for legitimate MoviePass expenses.
Itum, 42, was the company’s vice president of business development at the time. He was later promoted to executive vice president, and was responsible for managing the company’s day-to-day operations before leaving in March 2019.
In February 2019, Variety reported that Itum had pleaded guilty to stealing thousands of dollars from a previous employer, a furniture company. In that case, Itum admitted to charging personal expenses on the company debit card.
Itum pleaded not guilty in federal court on Tuesday and was released on $75,000 bond. He is next due to appear in court on April 18. After the SEC complaint was filed in September, Itum’s lawyer said he was being “unfairly targeted.”
MoviePass has since been acquired by a new ownership group and has relaunched in “beta” version in nine cities.
On Wednesday, Itum’s attorneys issued a statement on his behalf:
“The prosecutors have got it wrong. Khalid Itum worked earnestly and honestly for MoviePass. The only money paid to him or his consulting company was for genuine services provided to MoviePass and its corporate parent, and the money was spent in entirely legitimate ways.
“The indictment unsealed yesterday is both wrong on the facts and inconsistent with other government claims about the very same conduct. Bizarrely, the indictment fails to mention that the government has previously claimed that HMNY and MoviePass’s leadership approved the very same payments now described as ’embezzled.’
“Mr. Itum looks forward to refuting the government’s inconsistent and misguided allegations in court.”