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Watch Out for Fake COVID-19 Claims When Investing -- Investor Alert

Investors should be aware that false statements may be made -- including in company press releases, promotional materials, and social media posts -- about a company offering or developing products that prevent, detect, or treat COVID-19, in order to inflate the value of a company’s stock.  Fraudulent stock promotions of these companies also may be made through “research reports” that make predictions of a specific “target price.”  Never invest in a company based solely on information in a press release or stock promotion.  If claims about the company’s products are inaccurate or unreliable, you may lose a lot of the money you invest. 

Since the beginning of the COVID-19 pandemic, the SEC has brought numerous enforcement actions against companies for making false and misleading claims about purported COVID-19 related products, including a mobile app for detection, medical and personal protective equipment (PPE), diagnostic tests, facemasks, and thermal temperature scanners.  To learn more about SEC enforcement actions relating to COVID-19, visit the SEC Coronavirus (COVID-19) Response webpage.

In SEC v. SCWorx Corp., the SEC charged a company and its former CEO/Chairman for allegedly issuing a press release falsely stating that the company had a “committed purchase order” from a purported buyer to purchase two million COVID-19 rapid test kits, “with provision for additional weekly orders of two million units for 23 weeks, valued at $35 million per week.”  The SEC’s complaint alleges that following the press release, the company’s stock price surged more than 425% (having closed at $12.02 the day before) with more than 900 times the prior three-month average daily volume.  According to the SEC’s complaint, the company’s former CEO/Chairman publicly repeated these false and misleading statements about the distribution of COVID-19 rapid test kits over the course of April 2020.  As alleged, the defendants issued this press release despite having neither a legitimate supplier of COVID-19 test kits nor an executed purchase agreement with a buyer.  About a week after the company issued this press release, the SEC ordered that trading in the company’s securities be temporarily suspended because of questions and concerns regarding the adequacy and accuracy of publicly available information in the marketplace about the company.

In addition to bringing enforcement actions, the SEC has suspended trading in dozens of companies in connection with COVID-19 related statements.  The SEC can suspend trading in any stock for up to 10 days when, for example, it believes that information about a company is inaccurate or unreliable.  In deciding whether to purchase shares of a company, consider that if the SEC suspends trading in the company, you may be unable to sell your shares until the trading suspension is lifted, or even after.

Beware of Pump and Dump Schemes

False claims about a company’s products and services in some cases may be part of a “pump-and-dump” scheme where fraudsters profit at the expense of unsuspecting investors.  Promoters “pump” up, or increase, the stock price of a company by spreading positive, but often false, rumors.  These rumors cause many investors to purchase the stock.  Then the promoters or others working with them quickly “dump” their own shares before the hype ends.  Typically, after the promoters profit from their sales, the stock price drops, and the remaining investors lose most of their money. 

Microcap stocks may be particularly vulnerable to fraudulent investment schemes, including coronavirus-related scams.  Microcap stocks are low-priced stocks issued by the smallest of companies.  There is often limited publicly-available information about microcap companies’ management, products, services, and finances.  This can make it easier for fraudsters to spread false information about the company and to profit at the expense of unsuspecting investors.

Research Before Investing

Whether or not it relates to COVID-19, you should be suspicious anytime you receive an unsolicited (meaning you didn’t ask for it) stock recommendation.  Similarly, you should be skeptical if you are pressured to buy a stock quickly.  Always learn as much as you can about a company before investing.  Use the SEC’s EDGAR database to review information about a publicly traded company’s finances and operations in filings the company makes with the SEC. 

We urge investors to thoroughly research any investment opportunity.  Do not let FOMO (fear of missing out) on a hyped up investment involving COVID-19 cause you to lose your money to a fraud. 

Additional Resources

Frauds Targeting Main Street Investors -- Investor Alert

Updated Investor Alert: Fraudulent Stock Promotions

NASAA news release: Task Force Takes More Than 200 Actions to Protect Investors From Fraudsters Seeking to Profit from the Pandemic

Call OIEA at 1-800-732-0330, ask a question using this online form, or email us at

Visit, the SEC’s website for individual investors.

Report possible securities fraud to the SEC.

Receive Investor Alerts and Bulletins from OIEA by email or RSS feed.  

This Investor Alert represents the views of the staff of the Office of Investor Education and Advocacy. It is not a rule, regulation, or statement of the Securities and Exchange Commission (“Commission”). The Commission has neither approved nor disapproved its content. This Alert, like all staff guidance, has no legal force or effect: it does not alter or amend applicable law, and it creates no new or additional obligations for any person.
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