The novel coronavirus outbreak and economic fallout is proving to be a bonanza for whistleblower lawyers as the U.S. securities regulator cracks down on a range of related misconduct from companies touting sham cures to misuse of federal aid.
FILE PHOTO: The U.S. Securities and Exchange Commission logo adorns an office door at the SEC headquarters in Washington, June 24, 2011. REUTERS/Jonathan Ernst/File Photo
“Unfortunately, fraudsters often seek to exploit difficult situations like the ongoing pandemic for their own gain. The SEC frequently relies on the tips that we receive from the public,” an SEC spokeswoman said. “I expect that is just the beginning. Typically about six months in we’ll see that matters will begin to crystallize, and at that point I would expect an uptick in enforcement cases,” he said.
The agency has created a new group to closely monitor the market and spot potential abuses. So far, that effort has led it to suspend trading in 31 so-called penny stocks for allegedly touting dubious COVID-19 cures, tests, treatments and medical supplies to investors. Stephen Kohn, a partner at Kohn, Kohn and Colapinto, said his firm has seen “a slew of coronavirus-related tips.” The SEC has heard from investors about scams related to a large number of small private companies as well as larger, listed “essential” firms like meat-packing houses, he said.
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