NJ Jury Indicts Ex-CEO For ‘Scam’ Involving COVID Test Kits: Feds

ESSEX COUNTY, NJ — A federal grand jury in New Jersey has indicted the former CEO of a New York-based health care company in connection with a coronavirus-related “scheme” that bilked investors out of at least $116 million, prosecutors announced Tuesday.

Marc Schessel, 62, of Greenwich, Connecticut, has been accused of misleading investors about SCWorx’s procurement of COVID-19 rapid test kits during the early days of the pandemic, according to the U.S. Attorney’s Office.

The FBI’s Newark Division is investigating the case against Schessel.

“As alleged in the indictment, Marc Schessel exploited the scarcity of COVID-19 tests at the outset of the pandemic to defraud investors and artificially increase his company’s stock price,” U.S. Attorney Philip Sellinger said.

Schessel was charged by indictment with two counts of securities fraud. He is scheduled to make his initial court appearance on June 7 in Newark federal court.

Prosecutors released the following statement about the allegations:

“Schessel caused his company to issue multiple public statements claiming that it was buying and reselling at least 48 million COVID-19 test kits, despite knowing that such statements were false and misleading. In early April 2020, Schessel executed a supply agreement with an Australian company to obtain 2 million COVID-19 test kits per week for six months, beginning on April 24, 2020. The agreement was based on the Australian company’s representations that it had the appropriate permissions from the U.S. Food and Drug Administration (FDA) and was already distributing COVID-19 tests. Contemporaneously, Schessel received a purchase order from a [Fairfield, New Jersey]-based company that planned to purchase the weekly shipments of 2 million COVID-19 test kits from Schessel’s health care company.”

Prosecutors continued:

“Despite learning new information on April 11, 2020, that called into question whether the Australian company had COVID-19 tests to sell to Schessel’s company that could be distributed in the United States, Schessel caused his company to issue a press release on April 13, 2020, in which it announced the purchase order for 48 million COVID-19 rapid test kits. Following this press release, Schessel received additional information that further called into question his company’s arrangements for the COVID-19 test kits. Despite learning facts that cast significant doubt on the status of the COVID-19 test kit deals, Schessel repeatedly confirmed the status and terms of those arrangements on numerous occasions between April 13, 2020, and April 17, 2020. In the wake of the April 13 announcement, the health care company’s share price surged, rising by over 400 percent from approximately $2.25 per share to an intraday high of $14.88. per share. As a result of this scheme, investors lost at least $116 million.”

According to the indictment, the publicly traded SCWorx Corp. had been seeing “significant financial difficulties” prior to the pandemic, with the share price of its securities dropping from approximately $2.11 on or about March 16, 2020, to approximately $1.56 on or about March 17, 2020.

Schessel allegedly received a text message from a company consultant and investor on March 17, which read: “Marc maybe we need something in the market?? a must...the stock needs a boost for sure… its [sic] a real issue now.”

The first count of securities fraud is punishable by a maximum of 20 years in prison, and the second count of securities fraud is punishable by a maximum of 25 years in prison, prosecutors said.

SEC SETTLEMENT

On Tuesday, the Securities and Exchange Commission (SEC) announced a separate settlement with SCWorx Corp. and Schessel for allegedly making false and misleading statements about the company’s plans to distribute COVID-19 rapid test kits.

SCWorx has agreed to settle the SEC’s charges and will pay a $125,000 civil penalty, authorities said.

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