throbber
Case 1:20-cv-10658 Document 1 Filed 12/17/20 Page 1 of 21
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`
`SECURITIES AND EXCHANGE
`COMMISSION,
`
` Plaintiff,
`
` -against-
`
`KEITH BERMAN and
`DECISION DIAGNOSTICS CORP.,
`
` Defendants.
`
`
`
`
`
`
`
`
`
`
`
`
`COMPLAINT
`
`20 Civ. 10658 ( )
`
` ECF CASE
`JURY TRIAL DEMANDED
`
`
`
`
`Plaintiff Securities and Exchange Commission (the “Commission”), for its Complaint
`
`against Keith Berman (“Berman”) and Decision Diagnostics Corp. (“DECN” or the “Company”
`
`and collectively, the “Defendants”), alleges as follows:
`
`SUMMARY OF THE ALLEGATIONS
`
`1.
`
`In the spring of 2020, Berman, the president and CEO of DECN, a biotechnology
`
`company, went on a publicity blitz to portray the Company as having created a working, break-
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`through technology that could accurately test for Coronavirus disease 2019 (“Covid-19”) using
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`just a finger-prick of blood and provide results in less than a minute. DECN’s share price and
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`trading volume surged as investors piled into the stock. While Berman and DECN portrayed
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`DECN’s product as something that would change the landscape of the Covid-19 pandemic
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`paralyzing the world, the truth was the Company did not have a test, only an idea that had not
`
`materialized into a product.
`
`2.
`
`From March 2020 to at least June 2020 (the “Relevant Period”), Berman made
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`materially false and misleading public statements through DECN press releases and other
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`statements about what he claimed was DECN’s blood testing kit that could accurately detect
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`
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`Case 1:20-cv-10658 Document 1 Filed 12/17/20 Page 2 of 21
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`Covid-19 and provide results in less than a minute. Berman also made materially false and
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`misleading statements concerning DECN’s efforts to obtain emergency use authorization (“EUA”)
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`from the U.S. Food and Drug Administration (“FDA”), the key regulatory approval DECN needed
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`before it could sell a testing product in the United States.
`
`3.
`
`In stark contrast to these representations, all DECN actually had at the time of
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`Berman’s statements was a theoretical concept that had not yet materialized into a product, and
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`without a product Berman knew that DECN could not meet the FDA’s emergency use
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`authorization testing requirements. These misstatements led to surges in the price and trading
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`volume of DECN.
`
`4.
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`DECN and Berman have directly or indirectly violated, and unless restrained and
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`enjoined, will continue to violate, Section 10(b) and Rule 10b-5 of the Securities Exchange Act of
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`1934 (“Exchange Act”) [15 U.S.C. § 78j(b) & 17 C.F.R. § 240.10b-5].
`
`DEFENDANTS
`
`5.
`
`DECN is a Nevada corporation incorporated in 2001 and headquartered in
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`California. DECN describes itself as a “prescription and non-prescription diagnostics and home
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`testing products distributor” and the manufacturer of “glucose test strips” for diabetes testing.
`
`6.
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`Berman, age 67, is a resident of Westlake Village, California. Berman is DECN’s
`
`sole director and has served as DECN’s President since 2006 and its Chief Executive Officer since
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`September 2017. From August 2006 through September 2017, Berman was DECN’s Principal
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`Executive Officer. Berman is not a medical doctor, does not have any formal training in medicine
`
`or virology, and prior to February 2020, had never conducted any research into using
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`electrochemical impedance spectroscopy, the technology at issue in this case, to detect viruses.
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`Berman previously stated: “I am responsible for [DECN’s] Covid-19 products. I am also the
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`
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`-2-
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`Case 1:20-cv-10658 Document 1 Filed 12/17/20 Page 3 of 21
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`products Program Manager. I am responsible for communicating its design and function as well
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`as managing its upcoming commerce. The scientists in Pennsylvania,…the engineers and clinical
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`chemists in Korea, all take their direction from me.”
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`JURISDICTION AND VENUE
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`7.
`
`This Court has jurisdiction over this action pursuant to Sections 21(d), 21(e), and
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`27 of the Exchange Act. [15 U.S.C. §§ 78u(d), 78u(e), and 78aa].
`
`8.
`
`The Court has personal jurisdiction over the Defendants and venue is proper in the
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`Southern District of New York because many of the acts and transactions constituting
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`the
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`violations alleged in this complaint occurred in the Southern District of New York. In particular,
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`during the Relevant Period, Berman gave interviews regarding DECN’s purported Covid-19 test,
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`which were disseminated throughout the District, including an interview with a correspondent for
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`a New York City television station that aired in this District. These interviews contained many of
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`the same false and misleading statements that were made in DECN’s press releases.
`
`9.
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`Further, many stock purchases during the Relevant Period originated in the
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`District. For example, in March 2020, nine of the market makers for DECN’s stock were located
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`in this District and at various points either actively quoted bids and asks for DECN stock,
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`facilitated trading in DECN stock, or both. Finally, DECN’s stock was at all relevant times quoted
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`on the Manhattan-based OTC Link ATS whose parent company is OTC Markets Group Inc.
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`(“OTC Markets”), and for each trade in DECN stock, necessary clearing services were processed
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`through the Depository Trust Clearing Corporation’s (“DTC”) data center located in Manhattan,
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`which thus was used to facilitate the actual exchange of stock for money between purchasers of
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`DECN shares.
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`10.
`
`The Defendants, directly and indirectly, have made use, in the United States, of the
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`
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`-3-
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`Case 1:20-cv-10658 Document 1 Filed 12/17/20 Page 4 of 21
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`means or instrumentalities of interstate commerce, the means or instruments of transportation or
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`communication in interstate commerce, and/or the mails, in connection with the acts, practices,
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`and courses of business set forth in this complaint.
`
`FACTS
`
`I.
`
`DECN’s Filing History with the SEC and Its Faltering Financial Situation
`
`11.
`
`DECN has a class of securities in the form of common stock that trades on the over-
`
`the-counter (“OTC”) market. DECN’s common stock is not registered with the Commission.
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`12.
`
`In 2016, DECN filed a Form 15 suspending its duty to make filings with the
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`Commission. DECN submits financial statements to OTC Markets, but the financial statements
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`are unaudited.
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`13.
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`At all times relevant to this Complaint, DECN’s stock was a “penny stock” as
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`defined by the Exchange Act. DECN’s stock traded at less than $5.00 per share and did not meet
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`any of the exceptions to penny stock classification under Section 3(a)(51) and Rule 3a51-1 of the
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`Exchange Act.
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`14.
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`As of April 21, 2020, DECN had approximately 13 market makers, and its common
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`stock was eligible for the “piggy back” exception of the Exchange Act, Rule 15c2-11(f)(3).
`
`15.
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`On April 23, 2020, the Commission issued an order suspending trading in DECN’s
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`stock from April 24, 2020 to May 7, 2020, because of questions regarding the accuracy and
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`adequacy of information in the marketplace about DECN.
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`16.
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`DECN common shares are no longer continuously quoted on an interdealer
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`quotation system. Instead, unsolicited quotations are being published by brokers (on behalf of
`
`their customers) on OTC Link ATS.
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`-4-
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`Case 1:20-cv-10658 Document 1 Filed 12/17/20 Page 5 of 21
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`17.
`
`According to DECN’s most recent annual financial statements for the fiscal year
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`ended December 31, 2019, submitted to OTC Markets on March 30, 2020, DECN reported cash
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`of approximately $50,000, total assets of approximately $5.1 million (the majority of which is the
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`reported value of certain intellectual property), and revenues of approximately $528,000.
`
`18.
`
`Additionally, DECN reported total liabilities of approximately $2.9 million and an
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`accumulated deficit of approximately $47.6 million since its inception.
`
`19.
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`DECN’s annual report for 2019, as well as prior quarterly reports, includes a going
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`concern statement questioning whether it could continue as a financially solvent company.
`
`II.
`
`DECN Seized Upon the Covid-19 Global Pandemic
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`20.
`
`In early 2020, Covid-19 was tearing through Asia and Europe. By February, the
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`virus started to spread rapidly throughout the United States. On March 11, 2020, the World Health
`
`Organization declared the Covid-19 outbreak a global pandemic.
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`21.
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`Berman has previously stated that in mid-February 2020, “I learned from a CNN
`
`news report of the outbreak of COVID-19 in Daegu, Korea (a/k/a Ground Zero), the location of
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`DECN’s diabetic test strip factory and research and development arm.” Thereafter, Berman
`
`decided to have DECN attempt to develop a Covid-19 blood test. This was the first time DECN
`
`ever pursued a test to detect a virus. Until this point, DECN’s primary business related to glucose
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`testing for diabetes.
`
`III. Berman Issued Multiple False and Misleading DECN Press Releases
`
`22.
`
`During the Relevant Period, Berman disseminated DECN’s press releases to the
`
`public through an account he alone controlled with Accesswire, a global press release and
`
`newswire service. Berman was the primary, if not sole, drafter of DECN’s press releases during
`
`the Relevant Period. Furthermore, Berman had final editorial control over the content of the press
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`
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`-5-
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`

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`Case 1:20-cv-10658 Document 1 Filed 12/17/20 Page 6 of 21
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`releases and made the sole and ultimate decision to issue DECN’s press releases. For each of the
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`DECN press releases discussed below, Berman disseminated them by uploading
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`them to
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`Accesswire from his account with the understanding that, under the Service Agreement Berman
`
`signed as DECN’s CEO, Accesswire would distribute the press releases to its North American lists
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`and, more generally, make the press releases publicly accessible through Google, Yahoo, and other
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`electronic services. In addition, all of these DECN press releases were posted to the OTC Markets
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`website, available at: https://www.otcmarkets.com/stock/DECN/news, where
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`financial
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`information and disclosures related to the Company were also posted.
`
`23.
`
`Overall, DECN and Berman’s press releases and other public statements falsely and
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`misleadingly conveyed to the market that DECN had a Covid-19 testing kit, which Berman
`
`branded and marketed as “GenViro!.” In truth, at the time these statements were made, Berman
`
`and DECN knew that DECN’s manufacturer had not manufactured a single testing kit or prototype
`
`device capable of testing for the presence of Covid-19 in a blood sample. The Commission uses
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`“testing kit” to describe DECN’s alleged product, which did not actually exist in any form, and
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`which Berman alternatively referred to as, among other things, the “screening test,” “screening
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`method,” “test kit,” “product,” “Swift kit,” “GenViro!,” “device,” and “professional use device.”
`
`24.
`
`At the time of the Defendants’ statements, DECN had an unproven and theoretical
`
`concept, but not a proven method for detecting Covid-19, let alone a physical Covid-19 testing kit.
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`Accordingly, the Defendants’ statements were false and misleading.
`
`25.
`
`Similarly, even though DECN had not built a Covid-19 testing kit, Berman made
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`false and misleading statements about DECN’s progress with the FDA towards obtaining EUA in
`
`press releases. Berman repeatedly claimed that DECN was close to completing the FDA’s testing
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`
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`-6-
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`Case 1:20-cv-10658 Document 1 Filed 12/17/20 Page 7 of 21
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`requirements and planned to complete them. However, Berman knew that DECN was unlikely to
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`meet the FDA’s testing requirements.
`
`26.
`
`The Defendants also omitted material facts in the DECN press releases and other
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`statements, thereby rendering such statements false and misleading. For example, the Defendants
`
`touted the time it would take to obtain test results, the accuracy of the results, and, more generally,
`
`that DECN’s Covid-19 testing kit worked. The Defendants also repeatedly used images that
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`purported to show DECN’s Covid-19 testing kit. However, the Defendants knew and failed to
`
`disclose that the Company had not made a physical product or prototype. In addition, the images
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`they used were not of an actual Covid-19 testing kit, but of an existing DECN blood-glucose meter
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`and a mock-up of packaging for GenViro!.
`
`27.
`
`Taken together or separately, Defendants’ statements misled the market because
`
`they created the false and misleading impression that the Company had a tangible and working
`
`Covid-19 testing kit, when it did not.
`
`A.
`
`28.
`
`False and Misleading Statements Concerning
`the Existence of a Covid-19 Testing Kit
`
`On March 3, 2020, Berman issued a press release on behalf of DECN. In the press
`
`release, Berman and DECN “in a break-through” “announce[d]” “the introduction of our new
`
`screening methodology for the Coronavirus,” and declared “[o]ur product is timely, simple to use,
`
`cost effective and will be commercial ready in the summer of 2020.” DECN’s press release also
`
`quoted Berman: “I want to say straight on that we have developed a Coronavirus screening method,
`
`not a cure or a vaccine for this virus...”
`
`29.
`
`These statements created the false and misleading impression that DECN had
`
`developed a Covid-19 testing kit when, in fact, the Company had not developed anything at that
`
`point. As of March 3, 2020, the Company had not even chosen a design for its testing kit; and,
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`
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`-7-
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`Case 1:20-cv-10658 Document 1 Filed 12/17/20 Page 8 of 21
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`just one day prior, a paid scientist for DECN, whom Berman described as his “primary consultant”
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`(the “Science Consultant”), emailed Berman and expressed doubt about DECN’s ability to test for
`
`Covid-19 using the technology Berman discussed in the March 3 press release.
`
`30.
`
`Over the next several weeks, Berman continued to issue DECN press releases, each
`
`of which falsely and misleadingly conveyed that the Company had developed a tangible Covid-19
`
`testing kit. In truth, during the entirety of the period in which Berman disseminated the materially
`
`false and misleading press releases containing the statements below, he knew that the Company
`
`had not manufactured a prototype or any tangible testing kit that could identify Covid-19 using a
`
`blood sample, and he did not know if DECN’s testing concept would work:
`
`Press Release Date
`
`Statements
`
`March 4, 2020
`
`Mr. Berman concluded, “I again want to reiterate that the development
`of our Coronavirus screening method is not a cure or a vaccine for this
`virus.”
`
`March 11, 2020
`
`Today, in the third discussion of our break-through test for the
`coronavirus (COVID19), we present the Coronavirus test kit and the
`Phase 1 unit forecast. The introduction of our new screening
`methodology for the Coronavirus (Covid19) will provide a timely,
`simple to use and cost effective solution for the screening of the
`frightening COVID19 virus.
`
`March 16, 2020
`
`Today, DECN announces in this first of four releases expected in the
`next 14 days, further details of our revolutionary Coronavirus
`(Covid19) screening test GenViro!™.
`
`March 16, 2020
`
`Keith Berman, CEO of DECN commented, “We plan a total of three
`additional releases in the coming days, the first new release discussing
`the product itself and why it is so special, the second release will
`discuss a roll-out plan, and the third release will summarize everything
`we have discussed to date, and talk about a second product we are
`working on, making use of the same technology, that is uber precise
`and destined to find its way into hospitals.”
`…
`Mr. Berman concluded, “I will say again, that we have developed a
`Coronavirus screening method, not a cure or a vaccine for this virus.”
`
`
`
`-8-
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`Case 1:20-cv-10658 Document 1 Filed 12/17/20 Page 9 of 21
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`Today, in this second of four updates about our GenViro™ “Swift” kit
`for the testing of COVID-19, we will focus on our expected roll-out.
`We are happy to inform interested parties that we have raised our 12-
`month forecast to 525 million kits.
`…
`Mr. Berman concluded, “As you might imagine with a product
`announcement of such importance, we have been contacted by a
`number of potential partners for our kit. To date we have discussed our
`GenViro™ product with a big box pharmacy chain, a master medical
`products distribution company, a large commercial lab, and a home
`health organization. All of these entities want the kits and we intend to
`write their business.”
`
`Keith Berman, CEO of DECN commented, “When we began exploring
`available testing methods for the Covid-19 virus, our goals were
`straight forward. Provide an easy to use, reliable, inexpensive test kit,
`designed for immediate use at the point of care, and eventually for at-
`home use. We accomplished these goals with our GenViro! Swift kit.”
`
`Keith Berman, CEO of Decision Diagnostics commented, “…I have
`always believed that our impedance based core technology, first used
`as a critical part of our GenUltimate TBG product in the fall of 2019,
`was an adjustable crescent wrench type tool with many and varied
`possible applications. The first result of our hard work is the Covid-19
`Swift kit that will be administered by professional health responders.
`
`March 17, 2020
`
`March 25, 2020
`
`April 6, 2020
`
`
`
`31.
`
`On April 7, 2020, Berman issued another DECN press release, quoting Berman:
`
`“Mr. Berman continued, ‘…Today our partners began ordering these components to begin build,
`
`assembly and bench testing for the post-prototype version of GenViro!™, Point of Care kit.’”
`
`Berman’s statement was once again false and misleading because he claimed that DECN was
`
`ordering components to build a “post-prototype” version of GenViro!, thereby creating the false
`
`impression that DECN had built a prototype of its Covid-19 testing kit, which it had not. In fact,
`
`Berman subsequently admitted in a sworn affidavit: “The fact that DECN did not have any test
`
`kits (or prototypes) available [on or before April 7, 2020] is hardly remarkable; in fact, any
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`assertion to the contrary would correctly be deemed to lack credibility.”
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`
`
`-9-
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`

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`Case 1:20-cv-10658 Document 1 Filed 12/17/20 Page 10 of 21
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`B.
`
`32.
`
`False and Misleading Statements Concerning
`Efficacy and Features of DECN’s Covid-19 Testing Kit
`
`Relatedly, the Defendants created a materially false and misleading impression
`
`about the existence of a Covid-19 testing kit through claims about the efficacy and features of a
`
`testing kit they had not yet made or tested. For example, on March 4, 2020, Berman issued a
`
`DECN press release describing DECN’s Covid-19 testing kit: “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.” Berman, through a quote in the DECN press release, went on to describe a
`
`purported feature of DECN’s Covid-19 testing kit: “…That is not to infer that unexpected clever
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`and useful features are not built into our Coronavirus screening solution. For example, not only
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`will the screening device provide the expected NEGATIVE or POSITIVE result (answer), but with
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`each result provided, the answer will be accompanied by a probability statistic that will allow the
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`user to determine the probability that the POSITIVE or NEGATIVE reported by the system may
`
`be a false rendering -- a false POSITIVE or a false NEGATIVE.”
`
`33.
`
`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
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`could not have confirmed—the testing kit’s ability to identify COVID-19 at all, let alone its
`
`accuracy, timeliness, or other device features. DECN still lacked a prototype or other physical
`
`Covid-19 testing kit when Berman disseminated additional false and misleading DECN press
`
`releases containing the statements below:
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`
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`-10-
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`Case 1:20-cv-10658 Document 1 Filed 12/17/20 Page 11 of 21
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`Press Release Date
`
`March 18, 2020
`
`March 23, 2020
`
`April 6, 2020
`
`April 21, 2020
`
`Statements
`
`Today, DECN announces that the company is revising strategies (and
`forecasts) for its GenViro!™ Covid-19 test kit, a test kit that provides a
`coronavirus result in less than a minute, at the point of case.
`
`Keith Berman, CEO of DECN commented, “…GenViro! provides
`results in 15 seconds, based on a small finger prick blood sample. The
`method is safe, effective, and its biggest benefit to the healthcare
`system is that the device can be used to screen out the 97% or 98% of
`those tested that are negative for COVID-19. Our method is quicker,
`provides the desired result, is much cheaper, and effective.”
`
`Keith Berman, CEO of Decision Diagnostics commented, …
`“Our Swift kit will take a small amount of time to administer to a
`patient by a professional, such as poking a patient's finger-tip to
`achieve a drop of blood. Results will be available in about 15 seconds.”
`…
`Mr. Berman continued, “…If April 3 is the date where we drove our
`product stake into the ground, then the new product was conceived,
`designed and readied for FDA EUA review in approximately 45 days.
`Our method is unique, minimally invasive, doesn’t require a painful
`nose swab, and true to its trade name – Swift.”
`
`The DECN GenViro! kit does not employ a nose swab, rather it
`receives its small blood sample through a finger prick, is self-contained
`and disposable, does not require a hospital or clinical lab based
`instrument for analysis, and it only takes 15 seconds, a minute fraction
`of the nose swab tests.
`
`
`34.
`
`DECN not only had failed to produce a prototype, or any COVID-19 testing kit at
`
`the time Berman made the above statements, but Berman also was repeatedly advised that the
`
`Company’s concept for a COVID-19 testing kit, which relied upon a blood sample, would not
`
`work as described in DECN’s press releases. Berman also knew that the statements were false and
`
`misleading because he had not determined whether his Covid-19 testing concept would work at
`
`all. For example, on March 21, 2020, Berman received an email from an advisor and former
`
`officer of DECN warning that Berman’s proposed method for detecting Covid-19 in small blood
`
`
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`-11-
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`Case 1:20-cv-10658 Document 1 Filed 12/17/20 Page 12 of 21
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`samples was “theoretical” and not a “proven, commercial method for detecting specific viruses”
`
`like Covid-19.
`
`35.
`
`On March 22, 2020, staff for DECN’s South Korean manufacturer informed
`
`Berman that: (1) the sample used for testing must be from nasal and/or throat swabs and not blood;
`
`and (2) even if a nasal and/or throat swab is used, DECN’s proposed testing method may not be
`
`able to provide a positive result for Covid-19.
`
`36.
`
`On April 2, 2020, staff of DECN’s South Korean manufacturer emailed Berman
`
`and again expressed skepticism that Covid-19 could be detected in blood. Berman forwarded this
`
`email to his Science Consultant, who replied and warned Berman that he too had “not seen any
`
`data to support that Covid or Influenza virus can be detected in blood.”
`
`37.
`
`And, on April 5, 2020, the Science Consultant emailed Berman: “[The South
`
`Korean manufacturer] and I seem to be looking at this project with different glasses. They are
`
`ready to implement something that is manufacturable. For me it is more important to demonstrate
`
`that the product is viable.”
`
`38.
`
`Other examples of Berman’s false and misleading statements come from a mid-
`
`April 2020 interview with a New York affiliate of CBS that aired on television and then was posted
`
`on the station’s website on May 5, 2020. In the interview, Berman falsely and misleadingly
`
`described DECN’s Covid-19 testing kit as a “game changer” because “it works” and “it works
`
`fast.” At the time, DECN still had not manufactured a prototype or other device that could detect
`
`Covid-19 in a blood sample nor had DECN conducted any testing on Covid-19-infected blood
`
`samples to confirm that it “works.”
`
`
`
`-12-
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`

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`Case 1:20-cv-10658 Document 1 Filed 12/17/20 Page 13 of 21
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`C.
`
`39.
`
`False and Misleading Statements Concerning
`DECN’s Testing, Validation, and Progress Towards
`FDA Emergency Use Authorization
`
`In other press releases, Berman and DECN made materially false and misleading
`
`statements about the existence of DECN’s Covid-19 testing kit through claims about testing,
`
`validation, and progress towards FDA emergency use authorization. Under the EUA mechanism,
`
`the FDA may allow the use of unapproved medical products like testing kits in an emergency to
`
`diagnose serious diseases, when certain statutory criteria have been met. Statements Berman and
`
`DECN made about FDA emergency use authorization were material to the market, including to
`
`investors and potential distributors and customers, because they falsely and misleadingly conveyed
`
`that DECN had a Covid-19 testing kit that could receive FDA emergency use authorization for
`
`DECN to sell it in the United States and that DECN management had a reasonable basis in fact for
`
`expecting authorization.
`
`40.
`
`For example, on March 16, 2020, Berman issued a DECN press release in which
`
`the Defendants claimed:
`
`We are awaiting release of blood samples from previously infected people in
`Daegu, Korea, so that we can complete testing and make a final report to the U.S.
`FDA so that we may secure our Emergency Waiver. In the meantime, all other
`requests made by the FDA will be met this week and next.
`
`41.
`
`This statement was materially false and misleading for several reasons. First,
`
`Berman knew that DECN and its South Korean manufacturer were not in a position to “complete
`
`testing” or make a final report to the FDA because the Science Consultant had not even finalized
`
`a design for the testing kit. Second, Berman’s statement created a false and misleading impression
`
`that at least some testing had been conducted on DECN’s testing kit, when it had not. Third,
`
`DECN did not have a testing kit and, therefore, could not have conducted testing prior to the
`
`statement and was not in a position to complete testing upon the release of infected blood samples.
`
`
`
`-13-
`
`

`

`Case 1:20-cv-10658 Document 1 Filed 12/17/20 Page 14 of 21
`
`42.
`
`On March 18, 2020, Berman issued a DECN press release stating that “[the]
`
`company expects that it will receive a major boost from the most recent and thus far most
`
`optimistic FDA guidance for Coronavirus test kits” and that “[a] significant change to this [FDA]
`
`policy is that once validation testing for a product has been completed, the test can be distributed
`
`to customers, entities and users, with certain labeling and a summary of test results provided on
`
`the company website (and/or the packaging).” Berman then went on to claim:
`
`GenViro!™ has been validated at the company’s R&D center in Daegu, Korea for
`the H5N1 virus and most recently the methodologically similar corona virus.
`
`
`Berman also provided a quote that provided, in part: “While the company will still need to provide
`
`ample data and a full discussion of its unique technology in the coming days, the new FDA policy
`
`will provide a channel that will allow the company to manufacture test kits and put these kits into
`
`distribution almost immediately.”
`
`43.
`
`The Defendants’ March 18 statements were materially false and misleading
`
`because Berman knew that DECN’s “R&D” center in Daegu, Korea did not validate GenViro! on
`
`H5N1 or Covid-19 because no testing kit existed on which it could have conducted any validation
`
`testing. At the time, DECN still had not completed its designs for component parts for its Covid-
`
`19 testing kit; its South Korean manufacturer had not conducted any tests using infected blood
`
`samples containing H5N1 or Covid-19; and, neither DECN nor its South Korean manufacturer had
`
`access to Covid-19-infected blood samples. For the same reasons, DECN was also not in a position
`
`to “almost immediately” distribute any testing kits.
`
`44.
`
`DECN filed an application with the FDA for emergency use authorization for a
`
`Covid-19 testing kit (the “EUA Application”) on April 3, 2020. On April 6, 2020, Berman issued
`
`a DECN press release announcing DECN’s filing of its EUA application.
`
`
`
`-14-
`
`

`

`Case 1:20-cv-10658 Document 1 Filed 12/17/20 Page 15 of 21
`
`45.
`
`On April 7, 2020, Berman issued a DECN press release about its EUA Application.
`
`Berman, in describing DECN’s receipt of an acknowledgment and device serial number from the
`
`FDA, referenced exchanges DECN’s counsel had with the FDA and wrote “In one of those
`
`exchanges, the FDA provided Guidance for our final product testing.” Berman then provided a
`
`quote for the press release:
`
`As early as Saturday April 4, it was clear that the FDA review staff was aware that
`our methodology was different than those slower and older methods that had
`received FDA EUAs, or were in review. Although the testing requested will be
`rigorous, it appears that testing will require 30 known Covid-19 positive samples
`and 30 known Covid-19 negative samples, all samples based on venous blood. The
`company is now looking to contract with a hospital or commercial laboratory to
`complete this testing.
`
`46.
`
`Subsequently, on April 23, 2020, Berman issued an additional DECN press release
`
`
`
`with an update on the “FDA Emergency Waiver (EUA) Progress.” Berman referenced “two long
`
`conversations with FDA staff and management” noting that the second conversation occurred on
`
`April 14, 2020 “between our FDA counsel, DECN management and DECN technical and product
`
`development professionals.” Berman continued: “We believe we have completed discussions and
`
`have come to an understanding with the FDA on all of the testing required to receive the EUA.
`
`We plan to engage a specialty reference laboratory to complete this testing in the next 10 days.
`
`Testing should take about a week.”
`
`47.
`
`Berman’s April 7 and April 23 statements concerning the DECN’s EUA
`
`Application progress were materially false and misleading because they conveyed that DECN
`
`planned to begin the testing required by the FDA for approval of its EUA Application while
`
`omitting to disclose that DECN did not yet have a physical testing kit that could be tested. Berman
`
`also omitted to disclose that DECN had no intention of completing the required testing. Instead,
`
`to DECN’s FDA counsel, Berman claimed that he would pursue a testing method that had not been
`
`
`
`-15-
`
`

`

`Case 1:20-cv-10658 Document 1 Filed 12/17/20 Page 16 of 21
`
`accepted by the FDA, and apply political pressure in an effort to obtain an exception to the FDA’s
`
`testing requirements. For example on April 15, 2020, Berman emailed DECN’s FDA counsel:
`
`We are still, for the most part being held to test standards we will most likely not
`be able to live up to especially the expected demand for live patients to test. That is
`the killer. So, because we cannot negotiate with them, we do the next best thing,
`we flood the airwaves with interviews and we use lobbyist type political attacks at
`the upper levels in the FDA.
`
`48.
`
`On April 20, 2020, Berman again emailed DECN’s FDA counsel about the
`
`Company’s inability to meet the FDA’s testing requirements:
`
`testing
`the overall
`the FDA concerning
`from
`Have we heard back
`requirements/needs of our product (after our written summaries)? I want to make
`sure that we are able to use virus spike venous blood for our testing…If not we will
`use it anyway because it is impossible for a small company to have HazMat suit
`people to traipse around the USA seeing live (surviving) donors. If the FDA
`remains silent or if they tell us no, I will then turn to my political plan.
`
`D. Materially Misleading Omissions Through Testing Kit Images
`
`
`
`49.
`
`Berman and DECN also created a materially false and misleading impression about
`
`the existence of a Covid-19 testing kit through the use of pictures and other images. In a
`
`March 11, 2020 DECN press release drafted and disseminated by Berman, the following image
`
`appeared with a box containing “GenViro!™ COVID-19 Screen” with the tagline “With the
`
`GenExpidient Universal Biosensor and 2 sensors to screen for the Coronavirus”:
`
`
`
`-16-
`
`
`
`

`

`Case 1:20-cv-10658 Document 1 Fi

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