SEC Charges Six Michigan Companies and Four Individuals with Fraud
Litigation Release No. 25217 / September 23, 2021
Securities and Exchange Commission v. Biogenic, Inc., Diagnostic Link Ltd, LLC, Vital Systems Ltd LLC, BioTek Holdings LLC, Tek Wellness Inc., Capital Care Management LLC, Susann Ashley Cargnino a/k/a Susann Ashley Walker a/k/a Ashley Walker, Zachari Alan Cargnino a/k/a Zach Alan, Julie Ann Youssef a/k/a Julie Ann a/k/a Julie Joseph, and Gary Youssef a/k/a Gary Joseph, No. 5:21-cv-12236-MFL-DRG (E.D. Mich. filed September 23, 2021)
The SEC today charged six Michigan based companies and four individuals with conducting a medical device scam that defrauded at least 55 investors of more than $6 million.
According to the SEC's complaint, from 2017 until March 2021, Gary Youssef and Julie Ann Youssef of California, and Zachari Cargnino and Susann Cargnino of Michigan, used six Michigan-based companies to offer investment contracts to buy medical testing devices. The defendants allegedly claimed that the devices would be placed in doctors' offices by the defendants and their businesses, and would purportedly generate passive income to investors for each test performed. The defendants allegedly made numerous false claims about the investment opportunity, including that the defendant entities manufactured the devices, the amount of passive return on investment that could be earned by investors, the entities' history of success, and the number of devices put into use by defendants. In fact, the complaint alleges, doctors performed few if any tests using the devices. According to the complaint, after investors bought devices and the doctors failed to use the machines, Julie Ann Youssef and Zachari Cargnino sent investors fake usage reports, Ms. Youssef lulled investors with false excuses, and Zachari or Susann Cargnino made Ponzi payments to investors. The complaint further alleges that the Cargninos used millions of dollars of defrauded investor money to buy jewelry, jet skis and a trailer, and three residential properties in Manitou Beach, Michigan.
The SEC's complaint, filed in the United States District Court for the Eastern District of Michigan, charges the defendants with violating the registration and antifraud provisions of Sections 5 and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC seeks permanent injunctions, civil penalties, and disgorgement with prejudgment interest.
Gary Youssef and Julie Ann Youssef, without admitting or denying the allegations in the complaint, consented to the entry of judgment against them as to all claims, including full injunctive relief against future violations, with disgorgement and penalties to be determined by the court upon motion by the Commission. The settlement is subject to court approval.
The SEC's investigation was conducted by Stephen T. Kaiser and Matthew B. Reisig, with assistance from Christian Schultz, who will lead the SEC's litigation. The case was supervised by Tim England, Fred Block, and Melissa Hodgman.