The Zynex Medical lawsuit refers to a sweeping federal fraud case in which Zynex, Inc., a Colorado pain-management device company, admitted to an $873 million billing scheme that ran from 2017 through late 2025. In February 2026, the company signed a non-prosecution agreement with the U.S. Department of Justice. Its former CEO Thomas Sandgaard and former COO Anna Lucsok were indicted on 15 criminal counts. Zynex filed for Chapter 11 bankruptcy in December 2025 and has since emerged under new ownership as a subsidiary of Altivera Medical Holdings.
What Zynex Was Accused of Doing
Zynex manufactured the NexWave, an electrotherapy device used for pain management, along with the electrode pads, batteries, and lead wires the device consumed. According to the federal indictment and the company’s own admissions, Zynex flooded patients with supplies they never asked for and did not need, then billed insurers for them.
The quantities were extreme. Zynex shipped as many as 32, 64, or 128 pairs of electrodes to a single patient each month, against a Medicare standard of three pairs per month. One complaint cited by The Capitol Forum described a patient receiving 640 pairs, roughly 18 years of supply.1The Capitol Forum. Zynex Company Improperly Billing Workers Compensation Funds for TENS Devices Supplies produced over $600 million of the $873 million Zynex collected during the relevant period, and the DOJ said the “vast majority” of those supply billings were fraudulent.2U.S. Department of Justice. Zynex Inc Agrees to Criminal Resolution Addressing Claims of Millions of Dollars of Health Care Fraud
Prosecutors said the scheme went beyond oversupplying. Zynex allegedly unbundled supply charges into separate codes instead of using a single bundled code, roughly tripling the reimbursement per claim, and engaged in recoding and upcoding to inflate payments. The company also shipped prescription-only devices without valid prescriptions, and an Allstate complaint alleged that Zynex employees filled out prescription forms themselves, with evidence pointing to forged signatures on order forms.3Insurance Business Magazine. Zynex Class Action Alleges $873 Million Insurance Overbilling Scheme
Patients who called to cancel shipments were reportedly told to keep the items so Zynex could continue billing. The DOJ said the company ignored patient requests to stop and disregarded objections from its own employees.4U.S. Department of Justice. Former Zynex Inc Executives Charged With Health Care and Securities Fraud and Related Offenses TRICARE, the military’s health insurance program, became one of the largest targets: annual billings to TRICARE for electrodes rose from $1.7 million in 2015 to $90.5 million by 2022, a 5,223% increase, before TRICARE suspended payments and removed Zynex from its network.5The Capitol Forum. Zynex Company Overbilling Federal TRICARE Program for Electrodes
Criminal Charges Against the Former Executives
On January 21, 2026, a federal grand jury in Rhode Island indicted Sandgaard, 67, and Lucsok, 39, on 15 counts:
- One count of conspiracy to commit health care fraud, mail fraud, and securities fraud
- Nine counts of health care fraud
- Two counts of mail fraud
- Three counts of aggravated identity theft
The indictment alleged that Sandgaard and Lucsok drove the billing scheme and then used the inflated revenues to push up Zynex’s stock price. On earnings calls, they attributed the company’s growth to salesforce productivity, prescriber relationships, and patient care rather than disclosing the source of the revenue.4U.S. Department of Justice. Former Zynex Inc Executives Charged With Health Care and Securities Fraud and Related Offenses
The indictment also alleged that when financial reporters began asking questions, Sandgaard hired someone to disrupt the reporters’ personal lives and harass their spouses. According to the BBC, the harassment included sending used female underwear to a reporter’s spouse with a thank-you card alleging the reporter’s “illicit behavior,” and signing reporters up for therapy sessions listing conditions like erectile dysfunction.6BBC News. Zynex Inc Officials Indicted for Health Care Fraud
Both defendants appeared in federal court on January 21, 2026. Lucsok was released under electronic monitoring. Sandgaard was ordered detained on January 26, 2026.2U.S. Department of Justice. Zynex Inc Agrees to Criminal Resolution Addressing Claims of Millions of Dollars of Health Care Fraud Neither has entered a plea or been reported to have reached a cooperation agreement based on the available information.
The Company’s Non-Prosecution Agreement
Zynex itself was not indicted. On February 17, 2026, the company entered a non-prosecution agreement with the U.S. Attorney’s Office for the District of Rhode Island, conditioned on approval by the bankruptcy court. Zynex admitted to participating in a conspiracy to commit health care fraud, securities fraud, and mail fraud, and acknowledged that its prior executive leadership directed the scheme from at least 2017.7SEC EDGAR. Zynex Inc Non-Prosecution Agreement Filing
The financial terms:
- A criminal monetary penalty between $5 million and $12.5 million, depending on the company’s earnings over the agreement period
- Forfeiture of more than $85 million in unpaid TRICARE claims submitted during the payment suspension
- Forfeiture of more than $13 million in unpaid claims billed to other insurers and patients before September 1, 2025
Citing what it called a “substantial turnaround in conduct” under new management, the government agreed not to require an independent compliance monitor. The agreement runs until the penalty is paid in full or December 31, 2034, whichever comes first. If Zynex breaches the deal, the government can prosecute the company for any federal criminal violation tied to the admitted conduct.7SEC EDGAR. Zynex Inc Non-Prosecution Agreement Filing
The agreement also bars Zynex from rehiring any executive officer or director who was employed as of July 1, 2025, and requires the company to end auto-shipping, confirm medical necessity with patients before each shipment, stop unbundling and upcoding, bill only on valid prescriptions, and route hotline complaints to an independent audit committee and external auditors.
The SEC ran its own investigation but notified Zynex on February 18, 2026, that it did not intend to recommend an enforcement action against the company.8SEC EDGAR. Zynex Inc 8-K Filing
Civil Lawsuits Still in Play
The criminal resolution did not end the litigation. Several civil cases target Zynex, its former executives, or both.
Travelers Insurance
Travelers Casualty Insurance Company of America filed suit under seal in August 2023 in Los Angeles County Superior Court, alleging violations of the California Insurance Frauds Prevention Act. The filing attached more than 140 pages of allegedly fraudulent claims and accused Zynex of maintaining the auto-ship policy and instructing patients to keep unrequested supplies so it could keep billing.9NICB. Zynex Class Action Alleges $873 Million Insurance Overbilling Scheme
Allstate RICO Suit
On September 4, 2025, Allstate and several affiliates sued Zynex, Zynex Medical, Sandgaard, Lucsok, and then-CFO Daniel Moorhead in the U.S. District Court for the Eastern District of New York. Allstate alleged it paid more than $3 million in bodily-injury claims tied to fraudulent submissions and brought claims under the federal RICO statute, the Colorado Organized Crime Control Act, and New York fraud laws, seeking double and treble damages. The defendants had not yet responded to the complaint as of the last available information.10Insurance Business Magazine. Allstate Accuses Zynex of Masterminding $3 Million Insurance Fraud Scheme
Securities Class Action
On February 20, 2026, a federal securities class action, Beidel v. Thomas Sandgaard, et al. (No. 1:26-cv-00714), was filed in the U.S. District Court for the District of Colorado. The class period runs from February 25, 2021, through December 15, 2025. The complaint alleges that Zynex and its former executives violated federal securities laws by reporting “record growth” that was actually driven by the fraudulent billing scheme, citing specific earnings calls in which Sandgaard and Lucsok attributed revenue to sales productivity and prescriber relationships. The lead plaintiff deadline is April 21, 2026.11GlobeNewsWire. Hagens Berman Alerts Zynex Investors to Securities Class Action
Bankruptcy, Delisting, and What Happened to Shareholders
Zynex’s stock collapsed in stages. On March 11, 2025, shares fell more than 51% after the company disclosed a revenue shortfall linked to the TRICARE payment suspension. On August 1, 2025, shares fell another 45% to $1.26 following disclosures about regulatory compliance issues and the departure of Sandgaard and CFO Moorhead.12Kessler Topaz Meltzer & Check LLP. Zynex Inc Class Action Lawsuit
Zynex filed for Chapter 11 bankruptcy protection on December 15, 2025, in the U.S. Bankruptcy Court for the Southern District of Texas (Case No. 25-90810). Nasdaq notified the company of its intent to delist two days later. Trading was suspended on December 24, 2025, and the stock was formally delisted on January 13, 2026, moving to the Pink Limited Market under the ticker “ZYXIQ.”13Stock Titan. Zynex Inc Reports Material Event 8-K Filing
The bankruptcy court confirmed the plan of reorganization on March 19, 2026. The Ad Hoc noteholder group received 100% of the shares in the reorganized company in exchange for a credit bid of their $22 million in debtor-in-possession financing. All existing common shares were cancelled, and the company warned that existing shareholders would experience a “significant loss.”13Stock Titan. Zynex Inc Reports Material Event 8-K Filing Zynex emerged as a wholly owned subsidiary of Altivera Medical Holdings, LLC, and is transitioning to the Altivera Medical brand.14Reporter-News. Altivera Medical Acquires Zynex Following Successful Resolution of Investigations and Emergence From Bankruptcy
The Company Under New Leadership
Zynex’s board appointed Steven Dyson as CEO effective August 18, 2025, after selecting him in June. Sandgaard was removed from the board following the indictments. The company also brought in a new chief legal officer, John Bibb, and a new CFO, Vikram Bajaj, among other hires.15Zynex Medical Investor Room. Zynex Announces Arrival of Steven Dyson as CEO and Appointment of New Leadership in Key Roles Dyson said publicly that the company had “a lot to do to improve business performance” and pledged “commitment to the highest integrity in our business practices.”
Since August 2025, new management has ended the auto-ship policy that sat at the center of the fraud, required patient confirmation of medical necessity before shipments, and restructured billing to comply with proper coding standards.16PR Newswire. Zynex Poised for New Future With Resolution of Federal Investigation The business continues as a manufacturer and distributor of pain-management devices under the Altivera Medical name.