By Lauren Berg

Law360 (December 17, 2020, 9:47 PM EST) -- Decision Diagnostics Corp.'s chief executive went on a publicity spree boasting that the biotechnology company could accurately test for COVID-19 with a finger-prick of blood and provide near-instant results, but it wasn't true, the U.S. Securities and Exchange Commission said in a Manhattan federal lawsuit Thursday.

This spring, California-based Decision Diagnostics and its CEO Keith Berman claimed to have the technology that could test for the novel coronavirus with just a prick of the finger and provide results in less than a minute, which caused the company's stock to skyrocket as investors wanted to get in on the action, the SEC said.

But the test was just a dream that hadn't yet materialized into a product, according to the complaint.

Before the pandemic broke out, Decision Diagnostics' primary business related to glucose testing for diabetes, according to the complaint, but when the outbreak was first reported, Berman decided to have the company try to develop a COVID-19 blood test.

Berman started disseminating press releases, falsely conveying that Decision Diagnostics had a COVID-19 testing kit, which was marketed as "GenViro!," the SEC said. But the CEO knew the company's manufacturer hadn't actually made a single testing kit or prototype device capable of testing for the presence of COVID-19 in a blood sample, according to the complaint.

In one press release, Berman reportedly said, "This innovative, precise and cost-effective product is timely, simple to use, and most importantly will be commercial ready in the late summer of 2020," according to the complaint.

"However, the defendants failed to disclose that, at the time of the statements, DECN had not made a prototype or other physical device and therefore had not confirmed — and could not have confirmed — the testing kit's ability to identify COVID-19 at all, let alone its accuracy, timeliness, or other device features," the SEC said.

Berman also created false images purporting to show the testing device, even though he knew it didn't exist, according to the complaint. The images showed an existing Decision Diagnostics glucose-testing product alongside a mock up of the anticipated packaging for the COVID-19 testing device, the SEC said.

The SEC said Berman also lied about Decision Diagnostics' efforts to obtain emergency use authorization from the U.S. Food and Drug Administration, which was necessary in order to sell a testing product in the U.S.

In the three months before March 3, 2020, Decision Diagnostics' share price fluctuated between $0.01 and $0.02 per share with an average daily trading volume of 237,701 shares, according to the complaint. But after the company's first press release about the blood test on March 3, its stock price and trading volume shot up, with the price rising by nearly 1,200%, the SEC said,

Then, after the press releases in April publicizing the company's supposed emergency use authorization application, investor interest in Decision Diagnostic stock spiked, the SEC said. On April 6, the SEC said the stock price doubled from its prior trading day closing price of $0.06 per share to $0.12 per share. The next day, the stock price jumped to a closing price of about $0.20 per share, according to the complaint.

The suit claims violations of the Exchange Act and seeks to bar Berman and Decision Diagnostics from violating federal securities laws and order them to pay civil penalties, among other things.

Representatives for the parties did not immediately respond to requests for comment Thursday.

The SEC is represented in-house by James Carlson and David Misler.

Counsel information for Decision Diagnostics Corp. was not immediately available.

The case is Securities and Exchange Commission v. Keith Berman et al., case number 1:20-cv-10658, in the U.S. District Court for the Southern District of New York.

--Editing by Rebecca Flanagan.

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