Did Decision Diagnostics Corp. mislead investors about its purported plans to develop a 1-min Covid-19 test and its ability to meet the FDA testing requirements?
In March 2020, during the pandemic, the company’s CEO Berman began issuing a series of misleading statements asserting that Decision Diagnostics Corp. created a working, breakthrough technology that could accurately test for Coronavirus disease 2019 (“Covid-19”) using just a finger-prick of blood and provide results in less than a minute.
According to later revealed SEC & DOJ lawsuits, the company & Berman were having financial difficulties, notably, because Berman was spending “$360,000 in DECN company funds to pay to chat live on webcams with individuals living in foreign countries.”
Looking for “a new story”, he realized that “this coronavirus through impedance is the story that will allow [him] to raise millions.” He then asked his vendors if “technology that DECN used in glucose tests” could be used to test Covid-19. The answer was not positive, but Berman issued two press releases using the company name, claiming”new screening methodology” for COVID-19, characterized as a “break-through.”
He began issuing press releases and communicating on investorshangout and other platforms using his aliases, to “pump” DECN’s stock price. He also assured investors the company “developed a Coronavirus screening method” that would provide a positive or negative result in 15 seconds based on a small finger prick blood sample.
Berman contacted the FDA for emergency use authorization, but they responded that without a prototype and insurance to conduct scientifically reliable validation testing on human beings, the company would not receive the authorization.
Berman continued telling investors the company had a prototype, was testing it, and was close to getting FDA approval. The stock price increased by 2,050% between March and August 2020.
The SEC halted the trading and sued, the DOJ bought a criminal case. When asked by the SEC, he said he was never involved with message boards. But using his alias plutoniumimplosion” he wrote on the boards that “knock knock day” was coming, implying that “the authorities would show up at the homes of the individuals who had complained about DECN and arrest them.”
This post is open for investors to gather facts, and findings and track their exposure to related lawsuits. We invite investors and shareholders to contribute to this investigation for their own benefit, add events to the factual timeline below and vote on events’ pertinence.
A lawsuit was subsequently filed by the holder of senior notes. We will update this post as it unfolds.
The SEC announces charging the company with making false and misleading claims in numerous press releases, that the company “had developed a working, break-through technology that could accurately detect Covid-19 through a quick blood test.” The SEC files a complaint against Decision Diagnostics and its CEO, alleging that in contrast to the above cited misrepresentations, Decision Diagnostics caused surges in its stock price when it “actually had at the time . . . was a theoretical concept that had not yet materialized into a product, and without a product [its CEO] knew that [the company] could not meet the FDA’s emergency use authorization testing requirements.”See more on Factual Timeline
A shareholder brought this securities class action on behalf of a class consisting of all persons and entities other than defendants that purchased or otherwise acquired Decision Diagnostics securities between March 3, 2020 and December 17, 2020, both dates inclusive.
According to the complaint, defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the company’s business, operations, and prospects. Specifically, defendants allegedly failed to disclose to investors that:
(i) Decision Diagnostics had not developed any viable COVID-19 test, much less a test that could detect COVID-19 in less than one minute;
(ii) the Company could not meet the FDA’s EUA testing requirements for its purported COVID-19 test;
(iii) accordingly, Defendants had misrepresented the timeline within which it could realistically bring its COVID-19 test to market;
(iv) all the foregoing subjected Defendants to an increased risk of regulatory oversight and enforcement;
(v) as a result, Defendants’ public statements were materially false and misleading at all relevant times.
The court issued an order appointing the lead plaintiff and lead counsel.
This is a federal securities class action on behalf of a class consisting of all persons and entities other than Defendants that purchased or otherwise acquired Decision Diagnostics stock between March 3, 2020 and December 17, 2020, both dates inclusive.
On 04/27/2022, plaintiff voluntarily dismissed the complaint.
Plaintiffs filed their initial complaint on January 15, 2021, seeking to recover damages caused by Defendants’ violations of the federal securities laws and to pursue remedies under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder.
On October 14, 2021, Plaintiffs filed their Amended Complaint. The initial and Amended Complaint brought claims on behalf of Plaintiffs individually, and on behalf of a putative class of similarly-situated investors. No class has been certified, and no certification has been sought. Additionally, there has been no settlement or even settlement discussions that could potentially implicate a settlement class. Plaintiffs do not believe settlement is likely.
Defendants have not appeared, and have not answered or otherwise responded to either complaint. On February 11, 2022, the clerk entered a default as to both Defendants, Decision Diagnostics Corp. and Keith M. Berman. ECF No. 42.
Plaintiffs have determined that class certification is not feasible under the circumstances of this case. The dismissal effected by this notice is without prejudice and will not prevent any putative class member from pursuing claims individually.
Stipulation/Order of Dismissal
A securities class action lawsuit is a lawsuit on behalf of investors considered in a similar position, who purchased or sold securities of a company during a certain period and suffered losses because of an alleged wrongdoing. Security is often broadly defined to include bonds, stocks, options, derivatives, and other instruments.
Section 10b of the Securities Exchange Act of 1934 makes it unlawful to “use or employ, in connection with the purchase or sale of any security” a “manipulative or deceptive device or contrivance in contravention of such rules and regulations as the [SEC] may prescribe.” 15 U.S.C. § 78j(b). It is therefore forbidden to: employ any device, scheme, or artifice to defraud; make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made not misleading; or engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.
Generally, to be successful, the plaintiff must plead the following:
We invite you to read this article from the American Bar Association which, although from 2014, provide ample information to explore the world of class actions brought under section 10b of Securities Exchange Act of 1934.
Section 11 of the Securities Act of 1933 provides “an express right of action for damages . . . when a registration statement contains untrue statements of material fact or omissions of material fact.” (Thomas Lee Hazen, Treatise on the Law of Securities Regulation, §7.3 at 581 (4th ed. 2002)). Practically, buyers in an initial public offering (IPO), relying on the registration statement and prospectus, are given the right to file a complaint against the company and other signatories for losses sustained as a result of the deficient registration statement and prospectus.
Generally, at least four elements must be plead for the claim to survive:
A shareholder derivative lawsuit is a lawsuit brought by a shareholder of a company, on behalf of the company, against an insider (director, board of directors, executives) or a third-party to redress wrongs and harms to the company. Simply speaking, this mechanism exists because one cannot expect directors and insiders to sue themselves for harms they have done to the company.
The Private Securities Litigation Reform Act (PSLRA) of 1995 was enacted to tighten requirements for securities class actions to be brought in the United States. One of the mechanism put in place was a 60-day period, following the filing of the initial securities class action, for any shareholder considered in similar position to the one filing the initial class action complaint, to ask to be named lead plaintiff. Practically, any time a securities class action falling under the PSLRA is filed with a court, law firms advertise their willingness to pursue the case and invite other investors similarly situated to contact them.
The lead plaintiff in a securities class action is a shareholder who suffered losses related to the purchase or sale of a company’s security during a certain period of time, that is appointed with its choice of counsel to represent the rest of the similarly situated shareholders. To be appointed lead plaintiff, you need to contact a law firm, have them examine your losses and agree to be represented by them and ask to make a motion with the court to be appointed lead. The court will then look at all the motions from the different shareholders and make its decision based on a certain set of criteria. Your inability to be lead plaintiff shall not prevent you from any potential recovery in the event of a settlement.
A class period is a set period of time during which the purchasers or sellers of a company’s security claim in a class action lawsuit to have suffered losses. Class periods are based on the merits of the case and may evolve with the litigation.
A class action complaint will define the initial class of investors: the class period and the persons included in the class. You should look at the definition of the class to determine whether you are included or not. However, the class definition will evolve with the litigation. Its definition is very likely to change between the initial complaint filed and the possible settlement. Generally speaking, you should rely on the definitions of the class stated in a stipulation of settlement to determine whether or not you will be entitled to any recovery (see below about the opting-out mechanism).
You may. The mechanism is called opting-out of class. A lead plaintiff will agree on the potential recovery ratio in a settlement. You may have an interest in opting-out of a class if you have sustained large losses and believe bringing a separate lawsuit would entitle you to a larger ratio of recovery.
You may be able to bring a claim to arbitration in certain scenarios. We encourage you to contact a law firm of your choice to inquire about such alternative dispute resolution mechanism.
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