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COVID-19

SEC targets alleged coronavirus scams in 2 suits

Nicole Banas  

Nicole Banas  

(May 15, 2020) - Two penny stock companies are facing Securities and Exchange Commission lawsuits alleging they misrepresented themselves as sellers of COVID-19 home testing kits and body scanning equipment that could detect symptoms of the novel coronavirus.

Securities and Exchange Commission v. Applied Biosciences Corp., No. 20-cv-3729, complaint filed, 2020 WL 2479371 (S.D.N.Y. May 14, 2020).
 
Securities and Exchange Commission v. Turbo Global Partners Inc. et al., No. 20-cv-1120, complaint filed (M.D. Fla. May 14, 2020).
 
Applied Biosciences Corp.’s share price skyrocketed 80% on March 31 after the onetime cannabis company falsely claimed to be selling a test for COVID-19 that delivered results in 15 minutes, the SEC says in a complaint filed May 14 in the U.S. District Court for the Southern District of New York.
 
A separate action filed the same day in the U.S. District Court for the Middle District of Florida says Turbo Global Partners Inc. and CEO Robert W. Singerman lied to prospective investors about a partnership to distribute thermal equipment that could scan crowds to detect individuals with fevers.
 
The SEC suspended trading in both companies’ stock last month because of concerns about possible misinformation. Applied Biosciences Corp., Exchange Act Release No. 34-88627, 2020 WL 1873308 (Apr. 13, 2020); Turbo Global Partners Inc., Exchange Act Release No. 34-88609, 2020 WL 1819656 (Apr. 9, 2020).
 
The agency is represented by Marc P. Berger and Lara S. Mehraban in the Applied Biosciences action, and by Robert F. Schroeder and William P. Hicks in the case against Turbo.
 

Test kit scam?

The SEC claims Applied Biosciences abruptly changed its business strategy in late March from selling cannabinoid products to focusing on products related to the pandemic.
 
Applied Biosciences issued a statement March 31 announcing that it had started shipping COVID-19 testing kits for use in homes, hospitals and other locations, the suit says.
 
The statement failed to disclose that the U.S. Food and Drug Administration had not approved the tests or any other at-home tests for COVID-19, according to the suit.
 
Applied Biosciences also falsely implied that it had a hand in manufacturing the tests, but it merely agreed to purchase them from Essential Oil Co., the suit says.
 
Essential Oil, which is not a defendant in the suit, allegedly procured the test kits from a Chinese company.
 
Applied Biosciences’ share price climbed to a high of 80 cents between March 31 and April 7 before the SEC suspended trading of its shares April 13, the suit says.
 
The company released statements April 24 and 27 announcing that it terminated its agreement with Essential Oil and clarifying that the FDA did not permit home use of the testing kit, the complaint says.
 

’Break the chain of virus transmission’

The SEC claims Turbo and Singerman misrepresented that the company had partnered with BeMotion Inc. to distribute thermal scanning equipment that could “break the chain of virus transmission with early elevated fever detection.”
 
Canada-based BeMotion, which is not a party to the suit, contracted with a Chinese company in March to sell the equipment outside of China, the complaint says.
 
Turbo stated in a press release March 30 that it was the “U.S. coordinating agent and intermediary” for BeMotion in a multinational “public-private-partnership” for human temperature screening and facial recognition technology, the suit says.
 
BeMotion had no such partnership with any government entity, and the scanning equipment did not have the ability to distinguish human faces, according to the suit.
 
Turbo issued another statement April 3 saying that Singerman had contacted all 50 state governors and the CEOs of major retailers such as Walmart about the scanning equipment.
 
The misleading statements caused a surge in Turbo trading volume, and the company’s share price increased from less than a penny in late March to nearly 2 cents on April 3, the complaint says.
 
Both suits assert violations of the anti-fraud provision in Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C.A. § 78j(b), and SEC Rule 10b-5, 17 C.F.R. § 240.10b-5.
 
The SEC requests permanent injunctions against future violations, civil penalties and other relief.

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