SEC says firm misled investors over masks sales.
As the coronavirus spread through the United States, a South Florida company announced it had N95 masks to sell to help defend against the pandemic.
But the company, Praxsyn Corp. of West Palm Beach, retracted its statements when it became apparent it had none to sell. And now, Praxsyn is in trouble with the Securities and Exchange Commission.
In a civil complaint filed Tuesday in U.S. District Court in West Palm Beach, the commission alleged that the publicly traded company and its CEO, Frank J. Brady, made false and misleading statements to investors about Praxsyn’s ability to acquire and supply large quantities of N95 or other masks.
The commission has asked a federal judge to issue a permanent injunction and impose civil penalties against Praxsyn and prevent
Brady, 45, from serving as an officer or director of a publicly traded company in the future.
Brady, whom the complaint says lives in Atlanta, could not be reached for comment. Los Angeles lawyer Stanley Morris, who is listed as his attorney, did not respond to a telephone message.
Although the company has a West Palm Beach address at 777 South Flagler Ave., it is incorporated in Nevada.
“As alleged in the complaint, in the midst of the ongoing COVID-19 pandemic, Praxsyn and Brady sought to exploit unsuspecting investors by issuing false and misleading press releases concerning Praxsyn’s ability to source and supply N95 masks for the COVID-19 virus,” said Eric I. Bustillo, director of the SEC’s Miami regional office.
The commission suspended trading of the stock between March 26 and April 8. The shares, which are quoted on the OTC
Link, trade well below $1.
The commission says it acted after the company distributed separate news releases on Feb. 27 and March 4.
The announcements came as supplies for masks and other medical protective gear were in heavy demand from hospitals, medical professionals and governments seeking to build up their inventories in the face of the fast-moving coronavirus.
The first news release, entitled “Praxsyn Joining The Global Fight To Stop The Spread of Corona Virus,” announced Praxsyn was negotiating “the sale of millions of masks” that met standards set by National Institute for Occupational Safety and Health.
In the second news release, the SEC alleges, Praxsyn “made even more egregiously false statements, such as that it ‘has a large number of N95 masks, capable of protecting wearers from inhaling viruses, including the COVID-19 Coronavirus
available for order.’”
“Every factual statement in the March 4 press release was false,” the SEC complaint said.
“At the time, Praxsyn had no masks in its possession, no orders from any purchaser to buy masks, and no agreements to buy masks from any supplier or manufacturer,” the SEC alleged.
The company stock drew interest from investors who bought shares after the statements went public, the commission alleged.
On March 31, after the SEC suspended trading in the stock, Praxsyn issued a third news release conceding it did not have any masks to sell.
“While we had stated in our second press release that we were evaluating multiple orders and vetting various suppliers in order to guarantee a supply chain that can deliver millions of masks on a timely schedule, our initial press release could give the reader the impression that we had millions of masks on hand,” the company’s release said. “This is not the case. Rather we had been offered millions of masks and were attempting to vet that supply for quality and consistency while simultaneously vetting corresponding orders.”
“It was never our intention to leave any reader with the impression that we had masks on hand,” the release went on, “but rather we were ready to take orders and stand as an intermediary in closing sales to provide masks for sale abroad.”
Nonetheless, the SECs says in the complaint that the conduct by the company and Brady violated anti-fraud provisions of federal securities laws.
The SEC’s Office of Investor Education and Advocacy has issued an alert cautioning investors to be aware of COVID-19 financial schemes. A list contains the names of two dozen companies and Praxsyn’s name is included.