SEC Sues Biotech Company for Misleading Investors About Nonexistent COVID-19 Blood Testing Kit
The U.S. Securities and Exchange Commission (SEC) is suing a California biotech company after it made false statements about a Coronavirus blood testing kit.
The company, Decision Diagnostics Corp (DECN), and its owner and CEO Keith Berman are accused of allegedly misleading investors throughout March and June by promoting a blood testing kit that could test for the coronavirus in less than a minute. Along with trying to sway investors, the company sought to obtain approval from the Food and Drug Administration for emergency use of the blood testing kit.
According to the SEC, while Berman “portrayed DECN’s product as something that would change the landscape of the Covid-19 pandemic paralyzing the world, the truth was the Company did not have a test, only an idea that had not materialized into a product."
The SEC complaint goes on to say, “In stark contrast to these representations, all DECN actually had at the time of Berman’s statements was a theoretical concept that had not yet materialized into a product, and without a product, Berman knew that DECN could not meet the FDA’s emergency use authorization testing requirements. These misstatements led to surges in the price and trading volume of DECN.”
The SEC complaint also indicates that during the start of the pandemic, Berman participated in interviews, including one with a New York City television station in which he continued to advertise false and misleading statements about testing kits. In addition to interviews he participated in, Berman is accused of intentionally distributing several press releases on behalf of the company advertising false and misleading statements about his product.
In one press release, Berman touted, “the introduction of our new screening methodology for the Coronavirus.” Berman went on to claim, “ur product is timely, simple to use, cost effective and will be commercial ready in the summer of 2020.” At the time of this press release, Berman had no tangible product in existence.
As a result of his misleading claims, Berman’s statements led to a rise in the company’s stock price and trading volume.
On April 23rd, The SEC filed an order to suspend trading of Decision Diagnostics Corp securities to protect the interest of the public and investors. The order of suspension of trading was based on the following factors:
- The company claimed that they had a “technology perfected” covid-19 test kid that could offer accurate results within 15 seconds.
- Projection of sales that forecast up to 525 million covid-19 test kits being sold in the first year of production.
After news of SEC’s lawsuit against Decision Diagnostics Corp on December 17, the company’s share prices tumbled from $0.11 to $0.06. The stock is currently trading at $0.04.
The day after the SEC announced its lawsuit, lawsuits began trickling in on behalf of the shareholder. Global investor rights law firm Rosen Law Firm has announced its own investigation into the company. The law firm will be looking into potential security claims on behalf of shareholders of the biotech company and is planning to launch a securities lawsuit.
Kaskela Law LLC and The Schall Law Firm have also announced investigations into the biotech company on behalf of shareholders as well.
Before the company’s developmental testing for a kit that could detect COVID-19, the company marketed itself as a “prescription and non-prescription diagnostics and home testing products distributor." The company's primary focus was glucose testing kits and strips for diabetes. The blood testing kit was the first time Berman and his company ever aimed to develop a test for a virus. The SEC complaint describes Berman as someone who has no credentials in the medical field, is not a medical doctor, and has never formally received training in biology or the practice of Medicine.
