Biotech CEO who relied on multiple aliases sentenced to 7 years in prison for Theranos-like $28 million fraud involving a fake finger-prick Covid test

The CEO of a California biotech company, Decision Diagnostics, claimed to have a finger-prick test that could detect Covid-19 and used multiple fake identities to pump up the company’s stock price, authorities said. The CEO, Keith Berman, was sentenced on Friday to seven years in prison for the fraud that led to $28 million in investor losses, according to the Department of Justice.

He pleaded guilty in December to securities fraud, wire fraud, and obstruction of an official proceeding.

“At the height of the COVID-19 pandemic, Keith Berman gave people false hope that his biotech company had developed a rapid blood test to detect COVID-19. But there was no such test. Berman defrauded investors to profit from the pandemic,” Principal Deputy Assistant Attorney General Nicole Argentieri, head of the Justice Department’s Criminal Division, said in a statement on Friday.

Authorities said Berman, 70, made numerous false statements to investors, even claiming that he didn’t pay himself as the CEO of Decision Diagnostics, despite using $360,000 of company funds to pay for live chats on webcams with people in foreign countries. He did this as the company’s faced serious financial difficulties, according to the indictment.

In the scheme detailed in the complaint, Berman hatched a plan in March 2020 to use the pandemic to solve the Westlake Village, Calif.-biotech’s financial problems. He adopted a fake name, “Matthew Steinmann,” to pose as a friend of his to pretend to talk with investors. Using the alias, Berman also posted fake messages about the biotech firm to investors on message boards to gin up enthusiasm and artificially pump up the company’s stock price.

He used other aliases, such as “plutonium” and “plutoniumimplosion,” to refute allegations on the online message boards Investors Hub (iHUB) and Investors Hangout that it was Berman himself was making misleading claims about the biotech company. He even denied in one post that he was Berman, the indictment says. And while using the plutoniumimposion name, he said he was a Decision Diagnostic investor of 20 years. Regulators said Berman posted over 1,000 messages on the iHUB message board to pump up the stock price.

Officials said Berman claimed in March 2020 to have a Korean vendor who could develop a Covid-19 test to detect the virus in blood or saliva and published press releases touting the “break-through” and “new screening methodology.” Berman said his test would shorten the schedule for development of Covid tests and that they would be ready to go to market in summer 2020. In reality, the company didn’t have a test and hadn’t taken any steps to get government approval or waivers that would be required before a test could be offered to human beings, the indictment states. All the while, the vendor Berman claimed to be working with kept telling him that his test method was unlikely to be scientifically viable.

The case has a similar theme to the $10 billion fraud involving Theranos and its founder Elizabeth Holmes, who was sentenced in 2022 to 11 years in prison. Holmes claimed to investors to be making progress on a blood-sugar test that only needed a drop of blood to work.

In Berman’s case, authorities said he heard from a vendor that his method of testing for coronavirus wasn’t possible, but days later Berman published a press release saying that the vendor had “successfully validated a test” that could detect the virus in a blood sample. Berman kept it up throughout March and April in 2020, and the company’s stock price soared 1500% before the SEC suspended trading.

Berman then lied to the SEC and federal law enforcement about using the fake names and posting messages, the indictment states. He continued using the plutoniumimplosion alias to threaten people who may have complained about the biotech company to the SEC, warning them about “knock knock day.” He said officials would show up at the homes of those who complained about the company to arrest them. Berman later used the Matthew Steinmann alias to recruit another person on a message board to write a letter to the SEC on his behalf, calling an SEC attorney “Fredo,” the ne'er-do-well brother of the Michael Corleone character in The Godfather films, the indictment says.

Berman’s lawyer, Kevin Collins, wrote in court papers that Berman had put in a “genuine effort” toward making a Covid blood test, "but he made mistakes," acknowledging that Berman misstated the status of his project to raise funds.

This story was originally featured on Fortune.com