The CEO of a California biotech company, Decision Diagnostics, claimed to have a fingerprint test that would detect Covid-19 and used multiple fake identities to inflate the corporate’s stock price, authorities said. The CEO, Keith Berman, was sentenced to seven years in prison on Friday for fraud that resulted in $28 million in investor losses. in response to the Justice Department.
He pleaded guilty in December to securities fraud, wire fraud and obstruction of an official proceeding.
“At the height of the COVID-19 pandemic, Keith Berman raised 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,” Assistant Attorney General Nicole Argentieri, head of the Justice Department’s criminal division, said in an announcement Friday.
Authorities said Berman, 70, made quite a few false statements to investors and even claimed he had not paid himself as CEO of Decision Diagnostics, despite using $360,000 in company funds to live chat via webcams with people abroad have. He did this because, in response to the indictment, the corporate was in serious financial difficulties.
In the scheme described within the criticism, Berman devised a plan in March 2020 to make use of the pandemic to resolve the financial problems of the Westlake Village, California, biotech company. He adopted a false name, “Matthew Steinmann,” to pose as his friend and pretend he was talking to investors. Under this pseudonym, Berman also posted fake news concerning the biotech company to investors on message boards to drum up excitement and artificially inflate the corporate’s stock price.
He used other pseudonyms resembling “Plutonium” and “Plutonium Implosion” to refute claims on the net forums Investors Hub (iHUB) and Investors Hangout that Berman himself had made misleading claims concerning the biotech company. In one post, he even denied being Berman, the indictment says. And while he used the name “Plutonium Imposion,” he said he has been an investor in Decision Diagnostic for 20 years. Regulators said Berman posted over 1,000 messages on the iHUB forum to spice up the stock price.
Officials said Berman claimed in March 2020 to have a Korean vendor that would develop a Covid-19 test to detect the virus in blood or saliva and issued press releases touting the “breakthrough” and “latest screening method”. Berman said his test would shorten the timeline for developing Covid tests and that they might be available on the market in the summertime of 2020. In reality, the corporate didn’t have a test and had taken no steps to acquire government approval or waivers that may be required before a test could possibly be offered to people, the indictment says. Meanwhile, the seller Berman was supposedly working with kept telling him that his testing method was probably not scientifically viable.
The case has an analogous theme to the $10 billion fraud involving Theranos and its founder Elizabeth Holmes, who was sentenced to 11 years in prison in 2022. Holmes claimed to investors that he was making progress on a blood sugar test that only requires a drop of blood to work.
In Berman’s case, authorities said he heard from a provider that his approach to testing for the coronavirus was impossible, but days later Berman issued a press release saying the provider had “successfully validated a test” with which the virus might be detected within the blood sample. Berman maintained this course in March and April 2020 and the corporate’s stock price rose 1,500% before the SEC halted trading.
Berman then lied to the SEC and federal law enforcement by utilizing false names and posting messages, the indictment says. He continued to make use of the pseudonym “Plutonium Implosion” to threaten individuals who could have complained to the SEC concerning the biotech company, warning them of “Knock Knock Day.” He said officers would show up on the homes of those that complained concerning the company to arrest them. Later, Berman used the pseudonym Matthew Steinmann to recruit one other person on a message board to jot down a letter to the SEC on his behalf, calling an SEC attorney “Fredo,” the unethical brother of Michael Corleone’s character The Godfather Films, the indictment says.
Berman’s attorney, Kevin Collins, wrote in court filings that Berman made “real efforts” to get a Covid blood test “but he made mistakes” and acknowledged that Berman misrepresented the status of his fundraising project.
