New Jersey & New York Legal Defense
fraud investigation

New SEC Complaints Highlight Novel Form of COVID-19 Fraud: Misleading Press Releases

True to its prior warnings about actively policing the markets for unlawful attempts to profit from the ongoing pandemic, the Securities and Exchange Commission (“SEC”) today filed complaints against two corporations, Applied Biosciences Corp. (“ABC”) and Turbo Global Partners, Inc. (“TGP”), as well as TGP’s CEO Robert W. Singerman. These complaints follow prior trading suspensions of those companies’ microcap securities, dating back to April 9, 2020 (for TGP) and April 13, 2020 (for ABC), which suspensions were due to the same underlying conduct. The allegations of these complaints highlight a novel way that businesses may attempt to exploit the ongoing crisis to fraudulently enrich themselves, namely by issuing false and misleading press releases about products that could be useful in combatting the virus’s spread, causing their stock prices to spike.

The enforcement action against TGP and Singerman alleges that on March 30 and April 3, Singerman caused TGP to issue press releases regarding a supposed multi-national partnership to sell thermal scanning equipment to detect individuals with fevers, which technology could ostensibly detect individual with COVID-19 before they become symptomatic. The SEC alleges that those releases included statements purportedly made by the CEO of TGP’s supposed partner, attesting to the product’s accuracy and potential to be imminently deployed in each state. The SEC complaint alleges that these statements were false because the CEO of TGP’s supposed partner neither made them himself nor authorized their attribution to him, rather they were drafted by Singerman, and states further that such statements were substantively misleading because there were no agreements to sell the product or partnerships with any governmental entity about its deployment.

In much the same vein as its complaint against TGP, the SEC’s complaint against ABC alleges overblown and/or false statements affecting the potential value of its product. In that case, the SEC alleges that on March 31, ABC issued a press release about a supposed finger-prick COVID-19 test and that the press release both failed to disclose that the test was not yet approved by the FDA and, worse yet, suggested falsely that the test was a “home test ket” broadly available to the general public when, in fact, the tests could only be administered in consultation with a medical professional.

Both SEC complaints allege that, in the wake of these false press releases, the companies’ stock prices and trading volumes went up significantly. The complaints seek injunctions and civil penalties against the two companies, as well as an officer and director bar against Singerman, who is the subject of a prior SEC injunction stemming from his role in a “boiler room” fraud more than twenty years ago.

In a press release accompanying the complaints, the SEC’s Co-Directors of its Division of Enforcement each made statements, stressing the SEC’s commitment to combating COVID-related frauds, stating that they are “actively monitoring the markets to detect potential fraudsters who seek to use the COVID-19 crisis as a basis for investment scams,” and that the complaints against ABC and TGP “demonstrate the SEC’s vigilance over public companies that make materially misleading claims in press releases.”

Categories