The U.S. Securities and Exchange Commission has brought its first coronavirus-related fraud case, alleging Florida health-care company Praxsyn made “blatantly false” claims that it had secured a supply of N95 masks.
Praxsyn’s share price doubled after it issued a press release on Feb. 27 claiming it was negotiating to buy millions of masks meeting N95 standards. On March 4, it said in another release that it had a large number of N95 masks on hand and had created a “direct pipeline from manufacturers and suppliers to buyers” of the masks.
“Both press releases were blatantly false,” the SEC said in a complaint filed on Tuesday. “Praxsyn never had either a single order from any buyer to purchase masks, or a single contract with any manufacturer or supplier to obtain masks, let alone any masks actually in its possession.”
The complaint also names Praxsyn CEO Frank J. Brady, who was quoted in both releases, as a defendant.
“Dozens of emails and other documents from late February through March show Brady and at least one Praxsyn director knew efforts to obtain and sell N95 or other masks were proving futile,” the SEC alleged.
As MarketWatch reports, “The SEC has already taken enforcement action against at least 25 companies in connection with statements made relating to COVID-19 and is warning investors to beware of fraud, illicit schemes, and other misconduct during the pandemic.”
The SEC has temporarily halted trading in the shares of companies including Kleangas Energy Technologies, which claimed it had access to personal protective equipment, and Decision Diagnostics, which purported to have perfected a test kit technology.
According to the SEC, a Praxsyn director got no further than exchanging a “handful of emails” with two purported mask suppliers, one in Poland and the other in Turkey. Yet in the March 4 release, it had utilized a “worldwide network” to create its supply pipeline.
“Because there were no orders, no agreements, and no masks, there was no pipeline. And there was no worldwide network,” the SEC said.
The commission temporarily suspended trading in Praxsyn’s stock on March 26.
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