SEC Charges Company and CEO for Covid-19 Scam
Litigation Release No. 24807 / April 28, 2020
Securities and Exchange Commission v. Praxsyn Corporation and Frank J. Brady, No. 20-cv-80706 (S.D. Fla. filed April 28, 2020)
The Securities and Exchange Commission today announced charges against Praxsyn Corp. and its CEO for allegedly issuing false and misleading press releases claiming the company was able to acquire and supply large quantities of N95 or similar masks to protect wearers from the COVID-19 virus. The SEC previously issued an order on March 26 temporarily suspending trading in the securities of Praxsyn.
According to the SEC's complaint, Praxsyn, which is purportedly based in West Palm Beach, Florida, issued a press release on Feb. 27 stating that it was negotiating the sale of millions of N95 masks and "evaluating multiple orders and vetting various suppliers in order to guarantee a supply chain that can deliver millions of masks on a timely schedule." On March 4, Praxsyn issued another press release claiming it had a large number of N95 masks on hand and had created a "direct pipeline from manufacturers and suppliers to buyers" of the masks. Praxsyn's CEO Frank J. Brady was quoted in the release as telling any interested buyers that the company was accepting orders of a minimum of 100,000 masks. Despite these claims, according to the complaint, Praxsyn never had any masks in its possession, any orders for masks, or a single contract with any manufacturer or supplier to obtain masks. After regulatory inquiries, Praxsyn issued a third press release on March 31 admitting that it never had any masks available to sell.
The SEC's complaint, filed in federal court in the Southern District of Florida, charges Praxsyn and Brady with violating the antifraud provisions of Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks permanent injunctive relief and civil penalties. The SEC also seeks an officer and director bar against Brady.
The SEC's investigation, which is ongoing, has been conducted by the Microcap Fraud Task Force and supervised by Elisha L. Frank and Glenn S. Gordon. Robert K. Levenson is leading the SEC's litigation under the supervision of Andrew O. Schiff. The SEC appreciates the assistance of the Financial Industry Regulatory Authority (FINRA).
The SEC's Office of Investor Education and Advocacy previously issued an investor alert cautioning investors to be aware of COVID-19 scams.