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A putative class-action directors and officers liability lawsuit filed in federal district court charges that a biopharmaceutical company falsely claimed a 100% accurate COVID-19 test while company officials made millions dumping their stock.
Directors and officers of Salt Lake City, Utah-based Co-Diagnostics Inc. “including Ph.D.-level scientists who should know better – made continual, knowing and willful misstatements about their main product, a Covid-19 diagnostic test,” to pump up their stocks’ prices while its officers and directors “exercised low-priced options and dump their stock into the market,” said the complaint in Gelt Trading Ltd., a Cayman Islands limited company, v. Co-Diagnostic et al., which was filed in U.S. District Court in Salt Lake City on Monday. The lawsuit was first reported in the D&O Diary blog.
The complaint says Co-Diagnostics, which first received regulatory clearance to sell its tests in Europe in February, and its company officials and directors “made unequivocal statements” its tests were 100% accurate, and its stock price rose to a high of $29.72 a share.
Before it was set to announce its first-quarter earnings, however, news outlets reported the company was reticent to participate in U.S.-based testing to verify its accuracy claims, and the stock began to decline in price, to where it is now selling between $15 and $16 a share.
“During this time, and with a cloud of doubt hanging over the company’s claims of accuracy, Co-Diagnostics’ directors and officers have been rapidly exercising stock options for pennies per share and immediately selling their shares into the market reaping millions of dollars from the fraud-inflated price of the stock,” said the complaint, which charges the company with securities law violations.
The company did not respond to a request for comment.
Comparable litigation has been filed against companies including Plymouth Meeting, Pennsylvania-based Inovio Pharmaceuticals Inc. and San Diego-based Sorrento Therapeutics Inc. and their directors and officers.
More insurance and risk management news on the coronavirus crisis here.
The Pennsylvania Supreme Court on Thursday rejected a policyholder’s effort to circumvent lower courts and move its business interruption lawsuit straight to the high court’s docket.