The CEO of California biotech company Decision Diagnostics claimed he had a finger prick test that could detect Covid-19 and used several fake identities to boost the company’s stock price, authorities said. CEO Keith Berman was sentenced Friday to seven years in prison for fraud that resulted in $28 million in investor losses. According to the Ministry of Justice.
He pleaded guilty in December to securities fraud, wire fraud and obstruction of an official proceeding.
“In the midst of the COVID-19 pandemic, Keith Berman gave people false hope that his biotech company had developed a rapid blood test to detect COVID-19. But there was no such test. Berman defrauded investors to profit from the pandemic,” Principal Deputy Assistant Attorney General Nicole Argentieri, head of the Justice Department’s criminal division, said Friday.
Authorities said Berman, 70, made numerous false statements to investors, even claiming that he did not pay himself as CEO of Decision Diagnostics despite using $360,000 of company funds to pay for live webcam chats. with people from foreign countries. According to the indictment, he did this because the company was facing serious financial difficulties.
In a scheme detailed in the complaint, Berman hatched a plan in March 2020 to use the pandemic to solve the Westlake Village, California, biotech company’s financial problems. He took on the fake name “Matthew Steinmann” to impersonate his friend and pretend to be talking to investors. Using a pseudonym, Berman also posted fake messages about the biotech firm to investors on message boards to drum up enthusiasm and artificially boost the company’s stock price.
He used other aliases such as “plutonium” and “plutonium implosion” to refute claims on the online message boards Investors Hub (iHUB) and Investors Hangout that Berman was the one making misleading statements about the biotech company. In one post, he even denied being Berman, the indictment says. And, using the name “plutonium overlay,” he said he has been an investor in Decision Diagnostic for 20 years. Regulators said Berman posted more than 1,000 messages on the iHUB message board to boost the stock price.
Officials said that in March 2020, Berman said he had a Korean supplier that could develop a Covid-19 test to detect the virus in blood or saliva, and issued press releases touting the “breakthrough” and “new screening methodology ” Berman said his test would shorten the development timeline for Covid tests and that they would be ready to hit the market in the summer of 2020. In fact, the company did not have a test and did not take any steps to obtain government approvals or waivers, which would be required before the test could be offered to people, the indictment says. All the while, the supplier Berman claimed to work with continued to tell him that his test method was unlikely to be scientifically sound.
The case has a similar theme to the $10 billion fraud involving Theranos and its founder Elizabeth Holmes, who was sentenced in 2022 to 11 years in prison. Holmes told investors he had made progress developing a blood sugar test that required just a drop of blood to work.
In Berman’s case, authorities said he heard from a vendor that its coronavirus testing method was not possible, but days later, Berman issued a press release saying the vendor had “successfully validated a test” that could detect the virus in blood. sample. Berman maintained this course throughout March and April 2020, and the company’s stock price soared 1,500% before the SEC suspended trading.
Berman then lied to the SEC and federal law enforcement officials about using false names and publishing the messages, the indictment says. He continued to use the pseudonym “plutonium implosion” to threaten people who may have complained about the biotech company to the SEC, warning them of a “knock-knock day.” He said officials would go to the homes of those who complained about the company to arrest them. Berman later used the alias Matthew Steinman to recruit another man on the message board and write a letter to the SEC in his name, calling the SEC lawyer “Fredo”, the unlucky brother of Michael Corleone’s character in Godfather films, the indictment says.
Berman’s lawyer, Kevin Collins, wrote in court papers that Berman made a “sincere effort” to obtain the Covid blood test, “but he made mistakes,” admitting that Berman misrepresented the status of his fundraising project.