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Former CEO Convicted of Securities Fraud Over Misleading COVID-19 Test Kit Claims
Federal jury convicts Marc Schessel for deceiving investors about the procurement of COVID-19 rapid test kits, resulting in a substantial surge and subsequent drop in SCWorx's share price.
Newark, N.J. – Marc Schessel, the former CEO of SCWorx Corp., a publicly traded healthcare company, has been convicted on two counts of securities fraud for misleading investors about the company's acquisition of COVID-19 rapid test kits during the early stages of the pandemic.
Key Details:
- Who: Marc Schessel, 64, of New Paltz, New York, former CEO of SCWorx Corp.
- What: Convicted on two counts of securities fraud.
- When: The false statements were made from April 13 to April 17, 2020; Schessel was convicted today.
- Where: Announcements made publicly; trial held in Newark, N.J.
- Why: Misled investors about the procurement of COVID-19 test kits, leading to a temporary surge in SCWorx’s stock price.
- How: False claims about a binding contract with an Australian supplier lacking FDA approval and insufficient company funds to procure the kits.
Details of the Case:
Schessel falsely claimed that SCWorx had secured a binding contract to acquire millions of COVID-19 test kits from an Australian supplier, knowing that the supplier lacked FDA approval and SCWorx lacked sufficient funds. These misleading statements were disseminated through an April 13, 2020, press release, an April 15, 2020, investor call, an April 16, 2020, 8-K filing with the SEC, and an April 17, 2020, press release.
These announcements caused SCWorx’s share price to skyrocket over 400%, from $2.25 to $14.88. However, when SCWorx revealed it had terminated the agreements without acquiring any test kits, the share price plummeted below its pre-announcement level.
“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 a binding contract to obtain COVID-19 test kits, when in reality the test kits had never been approved by the FDA and he never had a binding contract to purchase them. 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,” said U.S. Attorney Philip R. Sellinger.
Legal Proceedings:
Schessel's sentencing is scheduled for December 17, 2024. He faces up to 20 years in prison for count one and up to 25 years for count two.
“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.”
Authorities Involved:
- U.S. Attorney Philip R. Sellinger
- Principal Deputy Assistant Attorney General Nicole M. Argentieri
- FBI Assistant Director Michael D. Nordwall
The FBI’s Newark Division led the investigation, with assistance from FINRA’s Criminal Prosecution Assistance Group. Prosecution was handled by Assistant U.S. Attorneys George Brandley and Angelica Sinopole, along with Principal Assistant Deputy Chief Lucy Jennings and Trial Attorneys Kate McCarthy and Spencer Ryan from the Justice Department’s Fraud Section.
Victim Assistance:
Victims seeking information and updates can contact the Fraud Section’s Victim Assistance Unit at 1-888-549-3945 or via email at Victimassistance.fraud@usdoj.gov. For more on victims' rights, visit the Justice Department's Victim Notification System website.
