Specialty Dental Brands Lawsuit: TSG’s $349M Fraud Claims

The Specialty Dental Brands lawsuit is a fraud case brought by private equity firm TSG Consumer Partners, which says it was tricked into investing $349 million in the Nashville-based dental support organization and lost every dollar when the company collapsed into a lender-led restructuring in 2024. TSG accuses Leon Capital Group, several SDB executives, and the company’s outside auditors of using fabricated financials and inflated growth projections to close the deal, then hiding the company’s deteriorating performance. The core fraud claims are now being litigated in Delaware Superior Court; separate negligent misrepresentation claims against the auditors are proceeding in Tennessee.¹

What TSG Alleges

TSG’s complaint describes the investment as a setup. It alleges Leon Capital and SDB executives used “fake financials and phony growth claims” to make the company look healthier than it was, then concealed its true condition long enough to complete the sale and pocket TSG’s money.¹ The complaint accuses those individuals of “juicing,” “goosing,” and “fluffing up the numbers” through accounting practices meant to inflate revenues and mask the business’s real condition.²

The suit names specific executives. Christopher Scales, SDB’s co-founder, served as CFO from 2017 to 2021, then as COO, and became CEO in July 2023. Daniel Harrington was CFO from 2021 to 2023. Stuart Michael Schwartz served as CEO from 2018 to 2023. Hunter Dallas, a Leon Capital executive, allegedly supervised SDB’s operational and financial compliance and acted as a de facto member of senior leadership. Josh Davis, SDB’s chief development officer, reportedly reported directly to Leon Capital founder Fernando De Leon.²

TSG is seeking to recover its full $349 million investment, plus damages and attorney fees. Leon Capital has not publicly responded to the fraud allegations in any source available as of this writing. None of the allegations have been adjudicated on the merits.

How the $349 Million Was Lost

In September 2022, TSG bought an undisclosed stake in SDB from Leon Capital Group.³ After the deal, ownership of SDB’s holding company split roughly into thirds: TSG held 29.1%, Leon Capital held 28.4%, and dentist-owners and management held the rest.⁴ Leon Capital’s own materials at the time valued SDB at over $2 billion.⁵

The $349 million figure in the complaint is made up of three pieces: a $328 million initial investment in July 2022, a $5 million loan extended in the summer of 2023, and a $16 million add-on equity investment around the same time.²

The investment unraveled quickly. SDB defaulted on its loan agreements, a failure the company attributed to rising interest rates.⁶ In July 2023, SDB’s holding company and several related entities filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Western District of Texas.⁷

Under a restructuring finalized in March 2024, a group of lenders — Pinebridge, Goldman Sachs, Maranon, and Comvest — exchanged outstanding debt for equity and took control of the board, receiving roughly 55% of the company. Management and dentist-owners retained about 45%.⁸ TSG and Leon Capital both walked away with their equity extinguished entirely.⁹ The Chapter 11 plan was confirmed in September 2024.⁷

Where the Cases Stand

TSG first sued in Tennessee. On November 26, 2024, it filed in the Chancery Court for Davidson County, naming Leon Capital, the SDB executives, and outside auditors Deloitte & Touche LLP and LBMC, PC as defendants. On May 12, 2025, the Tennessee court dismissed Leon Capital and the executives for lack of jurisdiction. The auditors remain in that case.¹⁰

Eleven days later, on May 23, 2025, TSG filed a new suit against Leon Capital and the executives in Delaware Superior Court, Case No. N25C-05-272. Leon Capital responded on July 18, 2025 with a motion to dismiss, which remains pending.¹⁰

The dispute is now split across two courts: fraud claims against Leon Capital and the executives in Delaware, and negligent misrepresentation claims against the auditors in Tennessee.

The Auditors’ Role

The claims against Deloitte and LBMC are for negligent misrepresentation rather than fraud. LBMC audited SDB for fiscal year 2021, and Deloitte took over for fiscal year 2022, the year TSG made its initial investment.² TSG’s theory ties the audited financials to the numbers it relied on when writing its check. That Tennessee proceeding continues.

SDB itself is not a defendant in either lawsuit. The company continues to operate under its lender-controlled ownership, listing 251 practices across 25 states.¹¹

1
Law360. Investment Firm Says It Was Duped Into $349M Dental Deal
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The Deal. TSG Makes Recession Play in Specialty Dental
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Oregon Health Authority. SDB 30-Day Review Summary Report
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Leon Capital Group. LCG History and Leadership
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Oregon Health Authority. SDB Restructure Preliminary Review Report
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Inforuptcy. Bankruptcy Case: Specialty Dental Holdings LLC
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Specialty Dental Brands. Specialty Dental Brands