On May 31, the Securities and Exchange Commission announced that it had charged SCWorx Corp. and its former Chief Executive Officer with making false and misleading statements about SCWorx’s plans to distribute COVID-19 rapid test kits in April 2020. The SEC alleges that, in order to overcome financial difficulties, SCWorx announced in a press release that it had a “committed purchase order” for two million rapid COVID tests.  However, that statement was allegedly false because SCWorx did not have a supplier for the test kits or an executed purchase agreement with any buyer.  On top of the original order for 2 million rapid tests, SCWorx allegedly stated that the purchase order included a “provision for additional weekly orders of 2 million units for 23 weeks, valued at $35M [million] per week.”  Following the press release, SCWorx stock rose 425% in price.  Because of the lack of information in the market concerning SCWorx, the SEC suspended trading in the company’s stocks between April 21, 2020, and May 5, 2020. 

Fraud in connection with the COVID-19 pandemic has long been a focus of the federal government.  SCWorx and the former CEO are charged with violating the antifraud provisions of the federal securities laws, and the complaint seeks injunctive relief, disgorgement, and civil penalties. SCWorx has agreed to a settlement with the SEC, but it neither admits nor denies the allegations.  The settlement calls for a $125,000 penalty and $471,000 in disgorgement with prejudgment interest of $32,761.56.  The U.S. Attorney’s Office for the District of New Jersey announced that it had brought criminal charges against the former CEO in a parallel action.  

The attorneys at Chilivis Grubman represent clients of all types and sizes in connection with SEC investigations and related securities litigation.  If you need assistance with such a matter, please contact us today.