Biotech CEO pleads guilty to COVID-19 securities fraud scheme
By SDCN Editor
A California man pleaded guilty Friday to securities fraud, wire fraud, and obstruction of an official proceeding in connection with his scheme to defraud investors by making false and misleading statements about the purported development of a new, blood-based COVID-19 test, leading to millions of dollars in investor losses, federal prosecutors said.
According to court documents, Keith Berman, 70, of Westlake Village, was the CEO and sole director of Decision Diagnostics Corporation, a public medical device company. Berman and DECN were in precarious financial condition in the lead-up to the COVID-19 pandemic, and Berman wrote in internal emails that he needed a “new story” to “raise millions.” Additionally, Berman had spent hundreds of thousands of dollars of company money on personal expenditures, despite publicly claiming not to take any compensation. Faced with these financial difficulties, from February through December 2020, Berman engaged in a scheme to defraud investors by falsely claiming that the company had developed a 15-second test to detect COVID-19 in a finger prick sample of blood. Despite his claims to the investing public, Berman knew that no such test existed.
Berman also falsely told investors that the Food and Drug Administration (FDA) was on the verge of approving the company’s request for emergency use authorization of its purported COVID-19 test. In truth, Berman knew that his company was unwilling and unable to meet the clinical testing required by the FDA but concealed these material facts and misled investors.
As part of the alleged scheme, Berman used a fake persona to repeat false and misleading statements to investors on internet message boards and to lull unsuspecting investors into inaction by refuting allegations of fraud and threatening potential whistleblowers with civil or criminal sanctions. Berman also obstructed a U.S. Securities and Exchange Commission (SEC) investigation into his conduct, using another false online identity to surreptitiously direct an investor to write a series of false and threatening letters to the highest levels of SEC management, including the chairman.
Berman pleaded guilty to one count each of securities fraud, wire fraud, and obstruction of an official proceeding. He is scheduled to be sentenced on April 12, 2024, and faces a maximum penalty of 20 years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.
USPIS and the FBI investigated the case.
