CEO, CTO accused of misleading investors about COVID-19 test
The U.S. Securities and Exchange Commission (SEC) has settled charges against Parallax Health Sciences and two of its executives for allegedly making misleading statements about a COVID-19 test the company claimed to be developing.
According to the SEC complaint, which was filed with the U.S. District Court for the Southern District of New York, Parallax issued several press releases in March and April 2020 incorrectly claiming that its COVID-19 test would be “soon available ”and that he had medical and personal protective equipment (PPE) for sale immediately.
However, the SEC alleges that Parallax’s insolvency prevented it from developing the drug test, and the company’s own projections showed it would have taken more than a year to develop the test even if it had. the funds she claimed to have, which she did not.
The complaint also alleges that Parallax never had the medical equipment or PPE that it claimed to have to sell not only because it did not have enough money to buy it, but because it did not have the approval of the United States Food and Drug Administration (FDA) to import and sell the equipment.
Despite the lack of funds or regulatory approval, the SEC alleges that CEO Paul Arena wrote misleading press releases to artificially increase the decline in Parallax’s share price.
“We allege that Parallax misled investors by telling them that the company was able to capitalize on the opportunities created by the COVID pandemic,” Paul Levenson, director of the SEC’s Boston regional office, said in a statement. communicated. “Such misinformation put investors at risk precisely as investors attempted to respond to the financial implications of a public health emergency. “
The complaint alleges that Arena knew Parallax did not have enough money to develop a COVID-19 test or to acquire PPE or medical equipment. He also says he knew the company did not have the required FDA registrations to import and sell the equipment.
“However, he drafted the seven misleading press releases to stimulate the decline in Parallax’s stock price,” according to the complaint. “This plan was successful,” said the SEC, which alleges that in a four-week period beginning March 11, 2020, the daily closing price of Parallax common stock in the United States was on average 20%. higher than between January 1, 2020, and March 10, 2020, which was the day before Parallax published the first allegedly misleading press release.
The SEC alleges that Nathaniel Bradley, CTO of Parallax, helped Arena write two press releases and posted content on Parallax’s website claiming the company had PPE and medical equipment for sale immediately. While the regulator does not accuse Bradley of being involved in the alleged scam, he said he did not verify the accuracy of the announcements made by the company.
“Although Bradley was not aware of Arena’s plan to artificially increase Parallax’s share price,” the complaint said, “he went public with Parallax’s claims that he had PPE and medical equipment available for sale without verifying that Parallax had the required capital and necessary FDA registrations in place to acquire and distribute the equipment.
For example, in April 2020, Parallax issued a press release stating that it had received more than $ 10 million in telehealth and medical supplies contracts. However, the SEC alleges that in reality, Parallax only had about $ 245,000 in orders at the time.
“Parallax and Arena knew, or recklessly ignored, that the other orders claimed by the company were only requests for quotes which had not been pursued by the requesting parties or orders which had been canceled,” the complaint states.
Without admitting or denying the SEC charges, Parallax, Arena and Bradley agreed to pay penalties of $ 100,000, $ 45,000 and $ 40,000, respectively. Arena also agreed to be banned from acting as an officer or director of a public company for five years, while Bradley agreed to be banned from participating in a penny stock bid for three years. The settlements are subject to court approval.
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Tags: coronavirus, COVID-19, medical equipment, Nathaniel Bradley, Parallax Health Sciences, Parallax Health Sciences Inc., Paul Arena, PPE, SEC