Tricare had temporarily suspended all payments while it reviewed prior claims.
A medical device company built on the promise of pain relief now faces a reckoning over whether its growth was built on deception. Zynex, a San Diego electrotherapy maker, stands accused of systematically overbilling insurers — including the military's own health program — over nearly five years, a practice that allegedly enriched the company while concealing its fragility from investors. When the truth began to surface in 2025, the stock lost more than three-quarters of its value across two brutal trading days, and a class action lawsuit now seeks to answer the oldest question in corporate fraud: who knew, and when did they know it.
- Zynex allegedly shipped far more electrodes than patients needed, then billed insurers as though every unit had been legitimately used — a quiet fraud running for nearly five years.
- Tricare, the military's health insurer and Zynex's single largest customer, suspended all payments in early 2025, triggering a 51% stock collapse in a single trading session.
- A separate lawsuit filed by insurer Travelers in 2023 had already sought over $23 million in damages, suggesting the overbilling scheme was known to at least some outside parties well before investors were told.
- In August 2025, Zynex admitted regulatory non-compliance, replaced its CEO and CFO, and abandoned its own financial guidance — a cascade of disclosures that erased another 45% of shareholder value.
- A class action now consolidates investor losses, with an April 21, 2026 deadline for those seeking to lead the litigation and shape how accountability is pursued.
Zynex, a San Diego-based maker of electrotherapy and cardiac monitoring devices, now faces a class action lawsuit alleging it spent nearly five years systematically inflating revenues by shipping products — particularly electrodes — far beyond what patients needed, then billing insurers for the excess as if it had been legitimately consumed. The lawsuit, filed by Robbins LLP on behalf of investors who held Zynex stock between February 2021 and December 2025, names CEO Thomas Sandgaard and two other executives as architects of a fraudulent overbilling operation.
The scheme's most consequential target was Tricare, the health insurance program for active-duty military personnel and their families, which represented between 20 and 25 percent of Zynex's total revenue. As early as August 2023, insurer Travelers had filed its own lawsuit against Zynex in California Superior Court, seeking more than $23 million tied to hundreds of allegedly false claims submitted between 2018 and 2023 — a warning sign that remained largely invisible to ordinary investors.
The full weight of the company's exposure only became clear in March 2025, when Zynex disclosed in its annual earnings report that Tricare had temporarily suspended all payments pending a review of prior claims. The market's response was immediate and severe: the stock fell 51% in a single session, closing at $3.41. Four months later, on July 31, Zynex acknowledged it had not been in compliance with industry regulations, replaced its chief executive and chief financial officer, and suspended all financial guidance. The following day, shares fell another 45%.
The lawsuit contends that management had long prioritized aggressive sales growth over legal compliance, failed to maintain adequate internal controls, and withheld from investors the material risk that Zynex could be removed from insurer networks entirely. Investors who purchased shares during the class period may recover losses at no cost, as Robbins LLP is proceeding on contingency. Those wishing to serve as lead plaintiff must file by April 21, 2026, while the case moves into discovery — where the full record of what executives knew, and when, will be tested.
Zynex, a San Diego-based maker of electrotherapy devices used in pain management and cardiac monitoring, is now the subject of a class action lawsuit alleging that the company systematically inflated its revenues and filed false insurance claims over nearly five years. The lawsuit, filed by Robbins LLP on behalf of investors who bought Zynex stock between February 2021 and December 2025, centers on a pattern of shipping products—particularly electrodes—far beyond what customers actually needed, then billing insurers for the excess inventory as if it had been legitimately used.
The scheme allegedly drew the attention of major insurance providers, most critically Tricare, the health insurance program serving active-duty military personnel and their families. Tricare accounts for between 20 and 25 percent of Zynex's total revenue, making it the company's largest customer. According to the complaint, Zynex and three named executives—Thomas Sandgaard, Evan Lucsok, and Thomas Fox—engaged in what amounts to a fraudulent overbilling operation spanning from 2018 through 2023. In August 2023, insurance company Travelers filed its own lawsuit against Zynex and the three executives in California Superior Court, seeking more than $23 million in damages and civil penalties related to hundreds of fraudulent claims submitted during that five-year window.
The company's problems remained hidden from investors until March 11, 2025, when Zynex reported its fourth-quarter and full-year 2024 financial results after the market closed. The earnings announcement revealed a significant revenue shortfall in the quarter, which management attributed to slower-than-normal payments from certain payers. More damaging was a single sentence buried in the disclosure: Tricare had temporarily suspended all payments while it reviewed prior claims. The market reacted swiftly. On March 12, the stock plummeted $3.59 per share—a 51.3 percent collapse—closing at $3.41 on unusually heavy trading volume. Investors who had believed they owned a growing medical device company suddenly faced the reality that its largest revenue stream had been cut off.
Four months later, on July 31, 2025, Zynex acknowledged what the lawsuit alleges had been true all along: the company had not been in compliance with industry regulations. That same day, the company announced what it called a "transformational" leadership change. Thomas Sandgaard, the chief executive, was replaced by Steven Dyson. Daniel Moorhead, the chief financial officer, announced his departure. The company also suspended its revenue and profitability guidance, signaling that management had no confidence in its own forecasts. The stock market responded with another sharp sell-off. On August 1, the stock fell from $2.23 per share to $1.26, a 45 percent decline in heavy trading volume.
The lawsuit alleges that management had systematically prioritized aggressive sales strategies over compliance with industry law and regulation. According to the complaint, the company failed to maintain adequate internal controls and did not disclose to investors that its order growth was built on illegal overbilling practices. The complaint further alleges that management knew—or should have known—that Zynex faced a reasonably likely risk of removal from insurer networks and penalties from federal regulators.
Investors who purchased Zynex securities during the class period may be eligible to recover losses without paying any fees or expenses; Robbins LLP is handling the case on a contingency basis. Those wishing to serve as lead plaintiff—a representative party who would direct the litigation on behalf of other shareholders—must submit their papers to the court by April 21, 2026. Shareholders need not take any action to remain eligible for a potential recovery; they can participate as absent class members. The case now moves into discovery, where the full scope of the company's billing practices and what executives knew and when they knew it will likely be tested.
Notable Quotes
Tricare has temporarily suspended payments as they review prior claims.— Zynex, in March 2025 earnings announcement
The company had not been in compliance with industry regulations.— Zynex, July 31, 2025 disclosure
The Hearth Conversation Another angle on the story
Why does a medical device company ship products nobody needs?
Revenue targets. The lawsuit alleges management prioritized hitting sales numbers over compliance. Shipping excess inventory inflates quarterly results and executive bonuses.
But wouldn't customers notice they're receiving electrodes they didn't order?
That's the point. Zynex wasn't selling to end users—it was billing insurers directly. The customers were hospitals and clinics that may not have closely tracked inventory. The fraud was in the billing, not the delivery.
So Tricare, the military's insurance, just discovered this in 2025?
Not exactly. Travelers sued in 2023 over fraudulent claims from 2018 onward. But Zynex kept it quiet. Investors didn't learn Tricare had suspended payments until March 2025, when the stock was already trading on false premises.
What does a CEO change actually signal here?
Accountability theater, possibly. Replacing Sandgaard and the CFO suggests the board recognized the old leadership couldn't be trusted. But it also signals the damage was deep enough that a fresh start was necessary to salvage anything.
Can shareholders actually recover money from this?
That depends on settlement or judgment. The lawsuit is just beginning. But yes—if Zynex or its insurers settle, shareholders who bought during the class period can claim losses. No fees unless they win.