COVID-19: Investment Scams

Shareholders Beware of Recent COVID-19 Investment Scams

With the rollout of a COVID-19 vaccine in December, 2021 is already looking bright. However, stock scams continue to plague investors. The Securities and Exchange Commission (SEC) issued an alert on December 14, 2020, warning of a “significant uptick in tips, complaints, and referrals involving investment scams.”

One area of notable concern is stock promotions involving COVID-19 claims.  The SEC has suspended trading in 36 companies and brought fraud charges against companies claiming to offer services or products relating to COVID-19.  The SEC has opened more than 150 coronavirus-related inquiries or investigations through the end of September.  Be sure to check out the SEC’s Coronavirus (COVID-19) Response page where the SEC lists its most recent enforcement actions. A few types of scams that the SEC warns investors about include:

Microcap Stocks

Many microcap stocks (Companies with market capitalizations greater than $50 million, but less than $300 million) trade at just a few dollars a share, but carry great risk. These smaller companies may not be followed by analysts or required to disclose much financial information because it is not traded on a major stock exchange. One example is Decision Diagnostics Corp., which is traded OTC. On December 18, 2020, the SEC announced charges against Decision Diagnostics and its CEO for “making false and misleading claims in numerous press releases that the company had developed a working, break-through technology that could accurately detect COVID-19 through a quick blood test.” The SEC’s complaint alleges that at the time of these claims, “Decision Diagnostics lacked a proven method for detecting the virus and had no physical testing device” and that “the statements created the misleading impression that the test was soon to be introduced to the market and led to surges in the price and trading volume of Decision Diagnostics’ stock.” Be sure to investigate the companies you choose to invest in and don’t get swept up in the hype.

Pump & Dump Schemes

In a pump and dump scheme, “fraudsters typically spread false or misleading information to create a buying frenzy that will ‘pump’ up the price of a stock and then ‘dump’ the shares of the stock by selling their own shares at the inflated price. Once the fraudsters dump their shares and stop hyping the stock, the stock price typically falls and investors lose money.” The promoters claim to have inside information that could send the stock price soaring. Keep in mind – if something sounds too good to be true it probably is. In June, the SEC charged a penny stock trader in Santa Cruz, California, with conducting a fraudulent pump and dump scheme for spreading false claims about a company that was developing an “approved” COVID-19 blood test through an online investment forum. Be cautious of where you get your information from and be sure to thoroughly vet any information you receive from unknown sources.


Before you jump on the pharma bandwagon, make sure that you understand how the company is positioned to distribute its COVID-19 vaccine. While only two companies are currently distributing the vaccine, analysts speculate that other pharmaceutical companies could soon roll out a vaccine and note that “those vaccines ‘will likely significantly stem the pandemic, but also reduce the profitability of the COVID-19 vaccine market.'” That said, analysts do not expect companies that develop a vaccine to see a significant jump or long term positive effect in their stock prices.


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Sources:  Yahoo Finance /

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