Decision Diagnostics is facing legal action after the company allegedly misled investors about the development of a COVID-19 diagnostic.
Licgo Partners, Sovereign Partners and Paradigm Capital, all investor companies, sued Decision Diagnostics and CEO Keith Berman in federal court under allegations that Berman had falsely stated that the company was developing an at-home COVID-19 test that was nearing regulatory authorization before denying the investors the right to convert shares worth millions at the time, according to a court document.
Westlake Village, Calif.-based Decision Diagnostics and Berman have been subject to previous legal action over the alleged false claims, as the SEC in December levied charges that Berman and the company “seized upon” the ongoing COVID-19 pandemic with false claims that Decision Diagnostics had developed a finger prick blood test for detecting COVID-19 in less than one minute.
The SEC also temporarily suspended trading in Decision Diagnostics’ securities on April 23, 2020, in the wake of the allegations against the company.
In the suit filed by the investor companies, the trio allege that, amid financial difficulties in the early months of 2020, Berman hatched a plan to mislead investors into believing that the company was nearing FDA emergency use authorization (EUA) for the at-home COVID-19 test.
“Neither [Decision Diagnostics], nor Berman, ever developed or created a COVID-19 screening test kit, let alone one that was either ready to pass FDA approvals or be available for distribution,” the court filing reads.
Additionally, a claim in an April press release made by Berman that announced a distribution partnership with a company owned by members of the investor companies was alleged to have been an “outright lie.”
In December complaint, the SEC said the company and the CEO made the false claims from March 2020 to at least June 2020, stating that they were headed toward FDA emergency use authorization. According to the SEC allegations, Decision Diagnostics lacked a proven method for detecting the virus and had no physical testing device.
Additionally, advisors warned that the kit they were trying to manufacture would not work as the company described, while the statements it made misled people to believe that it was set to be on the market soon, leading to surges in the price and trading volume of Decision Diagnostics’ stock.
Federal prosecutors alleged that, while misleading investors to boost the financial standing of the company, he also misappropriated hundreds of thousands of dollars in company funds for his own personal use over recent years.
Other allegations harken back to previous alleged misdeeds by Berman, with claims of repeated misrepresentations and overstatements regarding distribution contracts for various medical devices.
The investors say they tried at least twice in the spring of 2020 to have their shares converted into common stock that would be worth millions, but their efforts were halted by Berman (which violated previous agreements). Berman also allegedly hurled expletives at the investors or told them the “store” was closed. Once the alleged fraud was revealed, the company’s stock plummeted and the investors’ shares lost their value, anyway.
Those investors, in return for the alleged fraud, are seeking for the defendants to be temporarily restrained from disposing of all or part of their assets, pending the appointment of a receiver and completion of accounting and restitution to the investors.
Decision Diagnostics marketed its GenViro Swift COVID-19 diagnostic through PharmaTech Solutions. There remains a Twitter account dedicated to the product, but it has not had a post made since Dec. 10, 2020. Only eight days later, the SEC announced the charges against the company.
PharmaTech’s website still has the test kit listed under its family of products, but notes that it is not available for sale in the U.S. or Puerto Rico. It claims that FDA EUA applications have been filed and the product is for sale in select international venues and patent pending.