A new securities class action, filed Wednesday in Manhattan federal court, accused New York City-based health care logistics firm SCWorx Corp. of misleading investors about a supposed deal to buy and resell millions of COVID-19 rapid testing kits.

The lawsuit targeted SCWorx and its CEO Marc Schessel over an April 13 announcement that the company had secured a committed purchase order of two million test kits per week. The deal, SCWorx said at the time, included a provision for additional weekly orders of 2 million units over 23 weeks, valued at $35M per week.

According to the complaint, SCWorx' share price climbed by nearly $10 on the news to close at $12.20 the day of the announcement.

However, the company's stock plunged just days later, after Hindenburg Research published an April 17 report that called the called the deal "completely bogus." According to Hindenburg, the chief executive of SCWorx' supplier, Promedical, had a history of "defrauding its investors and customers" and "was also alleged to have falsified his medical credentials."

The complaint said that Promedical had told the Food and Drug Administration and Australian regulators that it was offering test kits from the Chinese manufacturer Guangzhou Wondfo Biotech.

Wondfo, however, responded that Promedical "fraudulently misrepresented themselves" as sellers of its COVID-19 tests and disavowed any relationship with the firm. Wondfo also said that the buyer SCWorx had lined up appeared incapable of handling orders of the size that SCWorx had touted.

The Guardian reported April 26 that Australian authorities were actively investigating Promedical and its CEO, Neran de Silva, over attempts to sell large quantities of unsanctioned test kits.

According to the complaint, SCWorx' stock fell more than 17 % over three consecutive trading days to close at $5.76 per share April 21. The U.S. Securities and Exchange Commission the following day halted trading on the company's stock through May 5, citing "questions and concerns regarding the adequacy and accuracy of publicly available information in the marketplace."

The lawsuit, filed by attorneys from the New York firm Glancy Prongay & Murray, alleged violations of the Exchange Act by investors who bought SCWorx stock at "artificially inflated prices between April 13 and April 17, and accused the company of knowingly participating in a "fraudulent scheme" based on non-public information.

"As a result of Defendants' wrongful acts and omissions, and the precipitous decline in the market value of the Company's securities, Plaintiff and other Class members have suffered significant losses and damages"

As of Thursday evening, Federman & Sherwood and The Rosen Law Firm had announced the filing of a similar suits in the U.S. District Court for the Southern District of New York.

SCWorx could not immediately be reached for comment.

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