Unfortunately, financial greed drives some people to commit illegal fraud in the offering, registration or sale of securities. At our law firm, we advocate for investors with financial losses who have purchased securities tainted by untruthful information that falsely inflates value and misleadingly portrays the degree of associated risk to buyers. Broker-dealers, financial advisors and financial firms may commit securities fraud, but corporate directors, officers and executives also engage in unscrupulous attempts to raise the value of their company’s shares through investment fraud.
In a previous post, we shared information about the Securities and Exchange Commission (SEC) Dec. 2020 Investor Alert on pandemic-related fraud. Using misleading statements about a company’s products and services during a public health emergency to exploit people’s fears may violate securities laws.
Enforcement of securities laws during the coronavirus era
Recently, on July 7, 2021, the SEC issued a litigation release announcing fraud charges and a proposed settlement of those charges against a health care company and two of its executives. They allegedly made false statements about the company’s financial stability and about products related to the pandemic, inflating stock prices based on untrue information.
Specifically, the SEC alleges that in early 2020 at the beginning of the pandemic, the defendants made misleading public statements about having products available for sale to assist in the mitigation of COVID-19 such as tests and personal protective equipment (PPE). The complaint (available through a link in the release) alleges that the company had neither the necessary funding for product development nor federal agency permissions to import PPE.
The defendants announced that they were in discussion with federal and global health organizations about developing COVID-19 screening tests, which they allegedly were not. In addition, the SEC asserts that they issued seven press releases containing false information to try to stop the company’s stock from a freefall in value.
The SEC in its complaint alleged that the executive defendants “in connection with the purchase or sale of securities, employed devices, schemes or artifices to defraud; made untrue statements of material fact … and engaged in acts, practices or courses of business which operated as a fraud or deceit …”
Proposed settlement terms
The federal court must approve the settlement proposals, which would impose penalties on the defendants like a prohibition on further, similar conduct, on offering penny stocks and on acting as an officer or director for certain kinds of companies. They would also be responsible to pay civil monetary penalties.
Anyone who suspects COVID-19-related securities fraud should seek advice from an experienced lawyer about potential legal remedies.