Former CEO of Publicly Traded Company Convicted of Securities Fraud for Misleading Investors About COVID-19 Rapid Test
Summary
A press release of the U.S. Attorney's Office for the District of New Jersey dated Wednesday, July 10, 2024, announcing that a federal jury convicted Marc Schessel, 64, of New Paltz, New York, former chief executive officer of SCWorx Corp., a publicly traded health care company, on two counts of securities fraud. According to court documents and evidence presented at trial, he caused SCWorx to make four false and misleading public statements claiming a binding contract to acquire millions of COVID test kits from an Australian supplier, although he knew the supplier lacked FDA approval for the kits and the company lacked the money to pay for them. The release states that the statements were an April 13, 2020, press release, an April 15, 2020, investor call, an April 16, 2020, 8-K filing and an April 17, 2020, press release.
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Press Release Former CEO of Publicly Traded Company Convicted of Securities Fraud for Misleading Investors About COVID-19 Rapid Test Wednesday, July 10, 2024 For Immediate Release U.S. Attorney's Office, District of New Jersey NEWARK, N.J. – A federal jury today convicted the former chief executive officer of SCWorx Corp. (SCWorx), a publicly traded health care company, on two counts of securities fraud for his participation in a scheme to mislead investors about SCWorx’s procurement of COVID-19 rapid test kits in the early days of the COVID-19 pandemic. According to court documents and evidence presented at trial: Marc Schessel, 64, of New Paltz, New York, caused SCWorx to make four false and misleading public statements, claiming that the company had a binding contract to acquire millions of needed COVID test kits during the very beginning of the pandemic from an Australian supplier. In reality, Schessel knew that the Australian supplier did not have FDA approval for the COVID test kits and that his company did not have nearly enough money to pay for them. Nevertheless, Schessel made four false and misleading statements during a five-day period: an April 13, 2020, press release, an April 15, 2020, investor conference call, an April 16, 2020, 8-K filing with the U.S. Securities and Exchange Commission, and an April 17, 2020, press release. Schessel made these false statements even though investors had started to raise questions about the accuracy of the statements and the legitimacy of SCWorx’s supposed contract to acquire the COVID test kits. Ultimately, Schessel and SCWorx did not obtain a single COVID test kit as part of the supposed transaction he had announced during the week. In the wake of these public announcements, SCWorx’s share price surged, rising by over 400 percent, from approximately $2.25 to an intraday high of $14.88. After SCWorx announced that it was terminating these COVID-19 rapid test kit agreements without having acquired any tests, SCWorx’s share price quickly dropped below its pre-April 13, 2020, announcement price. “This defendant took advantage of the global COVID pandemic by illegally pumping up the value of SCWorx’s stock by over 400 percent with multiple fraudulent public statements that he had binding contracts to obtain and resell COVID-19 test kits, when in reality the test kits did not have FDA authorization. When the truth came out, the value of the SCWorx stock crashed, causing investors to suffer substantial losses. Duping investors out of millions of dollars in the middle of a serious health emergency to salvage a failing business is especially egregious. Working with our partners, we will continue to investigate and bring to justice anyone who tried to profit from this crisis.” U.S. Attorney Philip R. Sellinger “If we think back to those very early days of the pandemic, the confusion and frustration about testing, the spread of the virus and social distancing had everyone frantically searching for answers,” FBI – Newark Special Agent in Charge James E. Dennehy said. “Schessel witnessed that chaos and chose to capitalize on it - promising a vital resource with rapid COVID tests that never existed. The passage of time dulls memories of traumatic events, but FBI Newark and our partners are methodically investigating and bringing to justice the fraudsters who mistakenly believe they'll escape unscathed.” The jury convicted Schessel of two counts of securities fraud. He is scheduled to be sentenced on Dec. 17, 2024, and faces a maximum penalty of 20 years in prison on count one and a maximum penalty of 25 years on count two. U.S. Attorney Sellinger; Principal Deputy Assistant Attorney General Nicole M. Argentieri of the Justice Department’s Criminal Division; and Assistant Director Michael D. Nordwall of the FBI’s Criminal Investigative Division made the announcement. The FBI’s Newark Division investigated the case. The Justice Department appreciates the assistance of FINRA’s Criminal Prosecution Assistance Group. Assistant U.S. Attorneys George Brandley and Angelica Sinopole of the District of New Jersey Health Care Fraud Unit and Principal Assistant Deputy Chief Lucy Jennings and Trial Attorneys Kate McCarthy and Spencer Ryan of the Justice Department’s Fraud Section and are prosecuting the case. The Fraud Section uses the Victim Notification System (VNS) to provide victims with case information and updates related to this case. Victims with questions may contact the Fraud Section’s Victim Assistance Unit by calling the Victim Assistance phone line at 1-888-549-3945 or by emailing Victimassistance.fraud@usdoj.gov. To learn more about victims’ rights, please visit: https://www.justice.gov/criminal-vns/victim-rights-derechos-de-las-v-ctimas . Updated July 10, 2024 Topic Securities, Commodities, & Investment Fraud Component USAO - New Jersey Press Release Number: 24-259 Related Content Press Release Former Partner at Broker-Dealer Firm Indicted for Role in $3.4 Million Insider Trading Scheme NEWARK, NJ. – A former partner at a New Jersey broker-dealer firm was arraigned on charges of engaging in an insider trading scheme that netted millions of dollars in illegal... July 18, 2024 Press Release New York Fund Manager Admits Multimillion-Dollar Investment Fraud Scheme NEWARK, N.J. – A New York fund manager today admitted defrauding investors out of millions of dollars. 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