The CEO of a California biotech firm, Determination Diagnostics, claimed to have a finger-prick take a look at that would detect Covid-19 and used a number of faux identities to pump up the corporate’s inventory worth, authorities stated. The CEO, Keith Berman, was sentenced on Friday to seven years in jail for the fraud that led to $28 million in investor losses, in response to the Division of Justice.
He pleaded responsible in December to securities fraud, wire fraud, and obstruction of an official continuing.
“On the peak of the COVID-19 pandemic, Keith Berman gave individuals false hope that his biotech firm had developed a speedy blood take a look at to detect COVID-19. However there was no such take a look at. Berman defrauded buyers to revenue from the pandemic,” Principal Deputy Assistant Lawyer Normal Nicole Argentieri, head of the Justice Division’s Felony Division, stated in an announcement on Friday.
Authorities stated Berman, 70, made quite a few false statements to buyers, even claiming that he didn’t pay himself because the CEO of Determination Diagnostics, regardless of utilizing $360,000 of firm funds to pay for stay chats on webcams with individuals in overseas international locations. He did this as the corporate’s confronted severe monetary difficulties, in response to the indictment.
Within the scheme detailed within the criticism, Berman hatched a plan in March 2020 to make use of the pandemic to unravel the Westlake Village, Calif.-biotech’s monetary issues. He adopted a faux identify, “Matthew Steinmann,” to pose as a good friend of his to faux to speak with buyers. Utilizing the alias, Berman additionally posted faux messages in regards to the biotech agency to buyers on message boards to gin up enthusiasm and artificially pump up the corporate’s inventory worth.
He used different aliases, reminiscent of “plutonium” and “plutoniumimplosion,” to refute allegations on the web message boards Traders Hub (iHUB) and Traders Hangout that it was Berman himself was making deceptive claims in regards to the biotech firm. He even denied in a single submit that he was Berman, the indictment says. And whereas utilizing the plutoniumimposion identify, he stated he was a Determination Diagnostic investor of 20 years. Regulators stated Berman posted over 1,000 messages on the iHUB message board to pump up the inventory worth.
Officers stated Berman claimed in March 2020 to have a Korean vendor who may develop a Covid-19 take a look at to detect the virus in blood or saliva and printed press releases touting the “break-through” and “new screening methodology.” Berman stated his take a look at would shorten the schedule for improvement of Covid checks and that they might be able to go to market in summer season 2020. In actuality, the corporate didn’t have a take a look at and hadn’t taken any steps to get authorities approval or waivers that will be required earlier than a take a look at may very well be supplied to human beings, the indictment states. All of the whereas, the seller Berman claimed to be working with saved telling him that his take a look at technique was unlikely to be scientifically viable.
The case has an analogous theme to the $10 billion fraud involving Theranos and its founder Elizabeth Holmes, who was sentenced in 2022 to 11 years in jail. Holmes claimed to buyers to be making progress on a blood-sugar take a look at that solely wanted a drop of blood to work.
In Berman’s case, authorities stated he heard from a vendor that his technique of testing for coronavirus wasn’t potential, however days later Berman printed a press launch saying that the seller had “efficiently validated a take a look at” that would detect the virus in a blood pattern. Berman saved it up all through March and April in 2020, and the corporate’s inventory worth soared 1500% earlier than the SEC suspended buying and selling.
Berman then lied to the SEC and federal legislation enforcement about utilizing the faux names and posting messages, the indictment states. He continued utilizing the plutoniumimplosion alias to threaten individuals who might have complained in regards to the biotech firm to the SEC, warning them about “knock knock day.” He stated officers would present up on the properties of those that complained in regards to the firm to arrest them. Berman later used the Matthew Steinmann alias to recruit one other particular person on a message board to write down a letter to the SEC on his behalf, calling an SEC lawyer “Fredo,” the ne’er-do-well brother of the Michael Corleone character in The Godfather movies, the indictment says.
Berman’s lawyer, Kevin Collins, wrote in court docket papers that Berman had put in a “real effort” towards making a Covid blood take a look at, “however he made errors,” acknowledging that Berman misstated the standing of his mission to lift funds.