Former CEO of SCWorx Corp convicted of securities fraud over COVID tests

People walk next to COVID-19 testing sites in New York

By Kanishka Singh

WASHINGTON (Reuters) -The former CEO of healthcare software company SCWorx Corp was found guilty of investor fraud for falsely stating the company was becoming a major supplier of COVID-19 rapid tests early in the pandemic, the U.S. Justice Department said on Wednesday.

The Justice Department said in a statement that a federal jury in New Jersey convicted Marc Schessel, 64, of two counts of securities fraud for public statements by SCWorx in April 2020, early in the pandemic, claiming that it was buying and reselling at least 48 million COVID-19 test kits, despite knowing that the statements were false. SCWorx said it had a binding contract to acquire the rapid COVID test kits from an Australian supplier.

The company and the former CEO had no immediate comment on Wednesday.

The Justice Department said that Schessel knew the Australian supplier did not have regulatory approval for the COVID test kits and that his company did not have nearly enough money to pay for them.

In the wake of those public announcements, SCWorx's share price rose by over 400%, from approximately $2.25 to an intraday high of $14.88.

SCWorx later announced it was terminating these COVID-19 rapid test kit agreements without having acquired any tests and its share price quickly dropped below its pre-announcement price, according to prosecutors.

Schessel is scheduled to be sentenced on Dec. 17. He faces a maximum penalty of 20 years in prison on count one and a maximum penalty of 25 years on count two, the Justice Department added.

(Reporting by Kanishka Singh in Washington; Editing by Leslie Adler and Cynthia Osterman)