Dr. Mark Lee Levine, Professor
Violation of Securities Law Related to Covid-19
The Securities and Exchange Commission (SEC) has been faced with numerous complaints, as have state securities commissioners, of scams, fraudulent actions and other violations of the law in the securities field which are related to the current Coronavirus, Covid-19—pandemic.
Although these Tips, when covering securities, usually deal with the area of Real Estate Securities issues, not the wide area of Securities, the concern with fraudulent actions undertaken in the broad securities field, but related to Covid-19, has affected many areas, including real estate.
It seems more than enough of a burden for the world to be dealing with the Covid-19 pandemic without the additional weight of facing fraud committed on the pubic by scare tactics and other misrepresentations taking place that tie to the pandemic of today.
The SEC filed a recent case seeing injunctive relief and other restraints against those involved in misleading the public as to the ability of the given Defendant Company to acquire large quantities of N95 (Covid-19) type masks to protect the wearer of the mask. In this Case, SEC v Praxsyn Corporation and Frank Brady, the clear attempt, as argued by the SEC, was for the Defendants to raise money from investors relative to the masks; yet, no masks were procured by the Defendants. (Neither Praxsyn nor its securities were registered with the SEC.)
The SEC suspended trading of the Praxsyn securities and brought other claims against the Defendants. This Case illustrates only one example of the current connection of many schemes in the market place that involve the sale of securities that appear to be addressing Covid-19 issues, where, per the SEC, the actions are structures to defraud the public.
Such schemes are not limited to Federal securities. There are also such frauds being undertaken in many states relative to the sale of securities and Covid-19.
Many state commissioners in the securities field are also facing situations in which fraudulent actions are undertaken against the public with the sale of securities in connections with Covid-19 type businesses.
One recent release by the Commonwealth of Massachusetts, via their Securities Division, stressed the need to be vigilant when considering investments in securities connected with the pandemic of the coronavirus. (https://www.sec.state.ma.us/sct/covid-19/Protect-Yourself-Against-Covid-19-Investment-Fraud.htm) In this announcement by the Secretary of the Commonwealth of Massachusetts, the message made it clear that there are many fraudulent promotions encouraging investing in securities that relate to prevention, detection and cures for Covid-19.
Such sale of securities tout the ability of the investor to gain a very high return in a short period. Many other state commissioners are facing these same type of claims made by those selling unregistered securities in their state.
Sadly, the world has huge medical and economic issues generated by this pandemic. The public does not need the added burden of deceitful schemes that are orchestrated to defraud the public.
Dr. Mark Lee Levine,
Professor, University of Denver