The Securities and Exchange Commission (SEC) announced a lawsuit last week that it filed against two executives of Parallax Health Sciences, Inc. with allegations that they disclosed misleading COVID-19 information. The two individuals facing charges are the company’s Chief Executive Officer, Paul Arena, and the company’s Chief Technology Officer, Nathaniel Bradley.
As a result of the misleading statement and other claims in the subsequent lawsuit, which was filed in the Southern District of New York, the SEC halted the trading of Parallax’s common stock on April 10, 2020.
Throughout March and April 2020, Parallax publicly announced in a series of press releases that they would have COVID-19 screening tests “available soon,” and that they had both medical and personal protective equipment available for “immediate sale.” Despite these statements by Parallax, the SEC argued that due to their financial state they would not have been able to develop a screening test and, even if they did have the ability, it would take over a year. Further, Parallax did not have the proper authorization or funding to purchase, import, or sell any medical or personal protective equipment.
The SEC believes, according to its press release, that Parallax made these false claims in an effort to boost their declining stock price. It also noted that following the press releases by Parallax, their stock price increased. This allowed Parallax to “capitalize on opportunities created by the COVID pandemic.” They were also able to take advantage of the vulnerability of investors “at precisely the moment when (they) were attempting to respond to the financial implications of a public health emergency.”
The SEC maintained that the violations detailed above by Parallax constitute explicit violations of the Securities Exchange Act of 1934. Parallax, Arena, and Bradley have responded by neither admitting nor denying the claims, but instead agreeing to pay penalties of $100,000, $45,000, and $40,000. Further consequences include Arena being “prohibited for five years from acting as a public company officer or director and from participating in an offering of penny stock.” Bradley will face the same restrictions but for three years as opposed to Arena’s five.