After Causing Investors To Lose US$116 Million, SCWorx Agrees To US$1.2 Million Settlement
The Securities and Exchange Commission announced on Tuesday that it has filed securities fraud charges against SCWorx Corp. (Nasdaq: WORX) and its founder and former CEO Marc Schessel regarding the company’s misrepresentation of its COVID-19 rapid test kits purchase in April 2020.
“We allege that the defendants engaged in an age-old fraud—lying about their business prospects—to capitalize opportunistically on the COVID pandemic,” said SEC Chair Gary Gensler.
The company, however, is looking to settle the charges with US$125,000 penalty, and disgorgement of US$471,000 with prejudgment interest of US$32,761.56. This is on top of the obligation to pay the disgorgement and prejudgment interest, valued at US$600,000, to settle the private class-action suit filed by the affected investors.
The charge comes after the US Department of Justice secured an indictment for Schessel regarding the misleading statements on the firm’s April 13, 2020 press release. The company then announced a supposed “committed purchase order” for two million COVID-19 rapid test kits, with a “provision for additional weekly orders of two million units for 23 weeks, valued at US$35 million per week.”
This statement, causing a 425% jump in stock price, was made “despite having neither a legitimate supplier of COVID-19 test kits nor an executed purchase agreement with a buyer.” SEC ordered a trading halt for SCWorx’s shares, which prompted a DOJ investigation.
The Justice Department estimates the investors lost more than US$116 million. On top of the charges filed by SEC, the 62-year-old former chief executive faces criminal securities fraud charges that could put him in jail for 45 years.
The New Jersey US Attorney’s Office also announced the separate filing of criminal charges against Schessel.
SCWorx last traded at US$0.75 on the Nasdaq.
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