A New York based company and its former chief executive have been charged with misleading investors about their plans to distribute COVID-19 rapid test kits in the early stages of the pandemic.
The Securities and Exchange Commission announced the charges against SCWorx Corp. and its former CEO and Chairman of the Board, Marc S. Schessel, in a complaint filed in federal district court in New Jersey.
The SEC said that in April 2020, Schessel and SCWorx claimed in a press release that a purported buyer had committed to purchase two million COVID-19 rapid test kits, with a provision of additional weekly orders of two million units. The announcement caused the company’s stock price to soar 425% from the previous day. SCWorx issued its press release even though it did not have a legitimate supplier of test kits or any purchase agreement with a buyer, according to the complaint. Schessel and SCWorx allegedly continued to repeat their false and misleading claims throughout the month of April.
Due to concerns about the accuracy of information about SCWorx, the SEC ordered a temporary suspension in trading of the company’s securities between April 21, 2020 and May 5, 2020. Schessel and SCWorx have now been charged with violating the antifraud provisions of the federal securities laws. In a parallel action, the U.S. Attorney’s Office and the U.S. Department of Justice’s Criminal Division announced criminal charges against Schessel.
“We allege that the defendants engaged in an age-old fraud—lying about their business prospects—to capitalize opportunistically on the COVID pandemic,” said SEC Chair Gary Gensler. “As the challenges from the pandemic continue, investors should be vigilant about COVID-related claims. The SEC will continue to root out fraud and prosecute those who attempt to use the surge of uncertainty from the pandemic to defraud the investing public.”
Without admitting or denying the allegations, SCWorx agreed to a settlement that includes permanent injunctions, the payment of a $125,000 civil penalty, and disgorgement of $471,000 with prejudgment interest of $32,761.56.
The attorneys at Lewitas Hyman have decades of experience dealing with securities fraud cases and have a deep understanding of how capital markets and financial service firms are intended to work to protect investors. If you think your financial professional or firm engaged in misconduct that caused you investment losses, contact Lewitas Hyman at (888) 655 6002 or through our online contact form for a no-cost evaluation of your matter.