The Securities and Exchange Commission on Tuesday announced charges against Praxsyn and its chief executive officer for lying about acquiring and being able to supply millions of N95 masks to protect wearers against the coronavirus.
Praxsyn issued a press release on Feb. 27 stating 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 Brady, was quoted in both releases as stating that the company was taking only orders of 100,000 masks or more.
On March 31, Praxsyn issued a third statement retracting the first two releases, noting its release “could give the reader the impression we had millions of masks on hand.”
“This is not the case,” the company said. “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, but rather we were ready to take orders and stand as an intermediary in closing sales to provide masks for sale abroad,” Praxsyn continued. “Regrettably, our third-party inspectors in Mexico inspected masks that were available for purchase but were determined to be substandard. We have been unsuccessful in obtaining any safe and functional substitute masks … and will henceforth cease any and all attempts to source or sell any masks.”
“Both press releases were blatantly false,” the SEC’s complaint states. “Praxsyn never had either a single order from any buyer to purchase masks, or a single contract with any manufacturer or supplier to obtain masks, let alone any masks actually in its possession.”
The SEC’s complaint, filed in federal court in the Southern District of Florida, charges Praxsyn and Brady with violating anti-fraud provisions of the federal securities laws and seeks permanent injunctive relief and civil penalties. The SEC also seeks an officer-and-director bar against Brady.
Praxsyn and Brady’s attempt to scam the system to take advantage of the pandemic is just one example of a broader fraud threat. “The Enforcement Division is committed to swiftly shutting down COVID-19 investment scams, seeking trading suspensions where appropriate, and pursuing fraud charges against both entities and individuals when warranted,” said Stephanie Avakian, co-director of the SEC’s Division of Enforcement.
On Monday, the SEC’s Office of Investor Education and Advocacy issued an investor alert warning about several investment frauds involving claims that a company’s products or services will be used to help stop the pandemic, especially claims involving microcap stocks. On March 26, the SEC issued an order to temporarily suspend trading in the securities of Praxsyn. Including Praxsyn, the SEC listed 24 companies in all in which it has issued trading suspensions in connection with coronavirus scams.