EDITOR’S NOTE: This article was updated Dec. 29 to include Keith Berman’s response to the allegations.
Westlake Village-based Decision Diagnostics and its CEO, Keith Berman, face civil and criminal charges by federal agencies that accuse the company of falsely claiming it had developed technology that could almost instantly detect COVID-19 in a blood test.
The U.S. Securities and Exchange Commission filed civil charges on Dec. 17 and the Department of Justice announced a criminal grand jury indictment Dec. 18. The complaints say Decision Diagnostics and its CEO falsely claimed the company developed a finger prick test that would detect COVID-19 in a drop of blood in 15 seconds.
In a statement released Dec. 18, Berman said he “intends to vigorously challenge all charges” against him and the company. He said he will continue to run the company, manage its line of diabetes testing products and develop a line of COVID-19 test kits.
The SEC complaint says that from March to at least June 2020, both the company and the CEO made misleading statements about the existence of the COVID testing device and the progress towards FDA approval, despite having advisors who warned the company that what it was describing wouldn’t work as it claimed.
The SEC claims these statements created a misleading impression that the test was soon to be introduced to the market and led to surges in the price and trading of the company’s stock. The stock is traded on an over-the-counter exchange, and between March and August its share price grew from 2 cents to 47 cents. It closed under 4 cents per share on Dec. 18, after losing more than half of its value in its highest trading volumes of the year.
“During this unprecedented time, when the need for truthful disclosures concerning COVID-19 tests is of vital importance, Decision Diagnostics and its CEO allegedly misled investors by claiming to have made a working test device when all they had was an idea that had not materialized into a product,” said Stephanie Avakian, director of the SEC Division of Enforcement, in a news release. “With the onset of the global pandemic, we quickly pivoted to identify potential areas of fraud. This case is another example of how the Commission will hold accountable those who exploit the pandemic to harm investors.”
The SEC wants a court order permanently preventing Berman and the company from violating securities laws and ordering them to pay civil penalties.