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SCWorx Coronavirus Test Kit Claims Lead to Derivative Suit

June 15, 2020, 8:49 PM

SCWorx Corp.'s leadership allegedly didn’t tell investors that an announced purchase order for coronavirus antibody test kits was either “grossly overblown” or “completely falsified,” a shareholder said Monday in New York federal district court.

The healthcare software firm touted the purchase order in mid-April but didn’t disclose potential problems with the purported buyer and supplier involved in the deal, according to a shareholder derivative suit filed in the U.S. District court for the Southern District of New York.

SCWorx’s buyer was “relatively tiny company that would almost certainly be unable to pay for” testing kits reportedly worth hundreds of millions of dollars, the suit said. And the supplier had “a history rife with fraudulent misrepresentations” and would also probably fall short of meeting its obligations under the deal, the complaint added.

SCWorx faced a temporary trading suspension April 22 after the Securities and Exchange Commission identified concerns about the accuracy of market information related to the test kit deal. The suspension expired May 5.

Investors filed similar allegations in a proposed class suit in April. King & Spalding LLP represents one of the SCWorx executives in the earlier suit.

Causes of Action: Breach of fiduciary duties; unjust enrichment; abuse of control; gross mismanagement; waste of corporate assets.

Relief: Damages with interest and restitution paid to SCWorx by the defendants; corporate governance reform; attorneys’ fees; court costs.

Response: SCWorx declined to comment on pending litigation.

Attorneys: Brown Law Firm PC represents the shareholders.

The case is Lozano v. Schessel, S.D.N.Y., No. 20-cv-04554, complaint filed 6/15/20.

To contact the reporter on this story: Jennifer Bennett in Washington at

To contact the editor responsible for this story: Rob Tricchinelli at