As I have documented on this site, many COVID-related securities suits have been filed since the initial outbreak of the pandemic in March 2020. At the core of many of these lawsuits are corporate claims that the defendant companies were positioned to profit from the pandemic. The U.S. Department of Justice now reports that a biotech executive has pleaded guilty to securities fraud and other charges in connection with his company’s false claims at the outset of the pandemic that it had developed a new blood-based test for COVID-19. A copy of the Department of Justice’s December 8, 2023, press release about the guilty plea can be found here.

Decision Diagnostics Corp. (DECN) was a publicly traded medical device company. According to the DOJ, at the outbreak of the pandemic, both DECN and its CEO, Keith Berman, were in “precarious financial condition.” The DOJ alleges that, faced with these difficulties, from February through December 2020, Berman “engaged in a scheme to defraud investors by falsely claiming that DECN had developed a 15-second test to detect COVID-19 in a finger prick sample of blood.” The DOJ alleges further that Berman knew that no such test existed.

The DOJ also alleges that Berman falsely told investors that the Food and Drug Administration was “on the verge of approving DECN’s request for emergency use authorization” of the supposed blood test. In truth, the DOJ alleges, Berman knew that the company was unable to meet the FDA’s clinical testing requirements and further that he concealed these facts from investors.

As a further part of the alleged scheme, the DOJ alleges, Berman used a fake persona to post false statements on internet message boards, and to lull unsuspecting investors into inaction by refuting allegations of fraud and threatening whistleblowers with civil or criminal sanctions.

According to the DOJ’s press release, Berman pleaded guilty to one count each of securities fraud, wire fraud, and obstruction of an official proceeding. Berman, who is 70 years old, faces a maximum penalty of 20 years in prison. He will be sentenced on April 12, 2024.

DECN and Berman were also the targets of a separate SEC enforcement proceeding. In December 2020, the SEC filed a civil fraud lawsuit in the Southern District of New York against the company and Berman based on similar allegations as those alleged by the DOJ. In fact, the DOJ’s criminal allegations against Berman include charges that Berman “obstructed” the SEC’s investigation into his conduct, “using another false online identity to surreptitiously direct an investor to write a series of false and threatening letters to the highest levels of the SEC, including the SEC Chairman.” (As part of his plea, Berman plead guilty to one count of obstruction of an official proceeding.)

In addition to the criminal proceeding and the SEC action, Berman and the company were also named as defendants in a securities class action lawsuit. As discussed here, the securities suit against DECN and Berman was the first COVID-related securities suit to be filed in 2021. On December 5, 2022, the court granted the plaintiffs’ motion for default judgment in the case.