Zynex, Inc. [ZYXIQ] Securities Class Action Lawsuit Update

• Case Name: Beidel v. Thomas Sandgaard, et al.
• Case No.: 1:26-cv-00714-DDD-KAS
• Jurisdiction: U.S. District Court, District of Colorado
• Filed on: February 20, 2026
• Class Period: February 25, 2021 - December 15, 2025

Introduction

Zynex, Inc. (NASDAQ: ZYXI) told investors a story about demand. Investors now allege that story was built on something else.

A federal securities class action filed in the U.S. District Court for the District of Colorado, Case No. 1:26-cv-00714, claims that Zynex and its senior leadership misled investors for years by concealing a widespread overbilling scheme that inflated revenue and stock price.

According to the complaint, between February 25, 2021 and December 15, 2025, the company generated hundreds of millions of dollars through improper billing practices. These practices allegedly included shipping excessive medical supplies to patients and charging insurers for items that were not medically necessary.

The collapse unfolded in stages. Insurers raised concerns. Payments were suspended. Executives acknowledged compliance failures. Leadership turned over. The company filed for bankruptcy.

“Most ZYXI shareholders never file or join the class action, which means they miss out on potential recovery funds,” said Attorney Joseph Levi.

Backdrop and Business Context

Zynex operates as a medical device company focused on electrotherapy products used for pain management, rehabilitation, and monitoring. Its core business model relies on recurring revenue generated from consumable supplies such as electrodes and batteries used alongside its devices.

This model depends on repeat shipments. Patients receive supplies over time, and insurers reimburse those shipments. When functioning properly, it creates predictable and scalable revenue.

But this structure also creates opportunity for abuse. When revenue is tied to volume, growth can be accelerated by increasing shipments rather than increasing genuine demand. The complaint alleges that Zynex did exactly that. What appeared to investors as steady expansion was, according to plaintiffs, the result of aggressive and improper billing practices.

Promises Made vs. Reality

During the class period, Zynex executives repeatedly attributed performance to strong demand and operational execution.

They highlighted “good order flow,” record prescription levels, and the effectiveness of the company’s salesforce as drivers of revenue growth.

Investigators later described a different mechanism. According to the complaint and related criminal allegations, the company allegedly shipped far more supplies than patients needed, sometimes sending dozens or even over one hundred electrode pairs per patient each month. These shipments were billed to insurers regardless of medical necessity or patient consent.

Federal authorities allege that Zynex collected more than $873 million through these practices, with the majority of supply billings characterized as unnecessary or improperly billed.

The public explanation emphasized demand. The alleged reality centered on volume.

Timeline of Alleged Misconduct and Disclosures

The alleged misconduct did not surface all at once. It emerged over time, through a series of disclosures and external events. In 2023, insurers began identifying irregularities. A lawsuit by Travelers alleged that Zynex shipped unnecessary supplies and billed without regard for patient need.

In June 2024, an investigative report described what it called an “oversupplying scheme,” bringing broader attention to the company’s practices.

In March 2025, Zynex disclosed that Tricare, its largest payer and a source of up to 25 percent of revenue, had suspended payments while reviewing prior claims. The stock dropped 51.3 percent in a single day.

In July 2025, management acknowledged compliance issues and announced leadership changes. The stock fell another 45 percent the following day.

By November 2025, new leadership confirmed ongoing government investigations. In December 2025, the company filed for Chapter 11 bankruptcy protection. In January 2026, federal prosecutors unsealed an indictment charging former executives with healthcare fraud, mail fraud, and securities fraud tied to the alleged scheme.

Each event narrowed the gap between what investors were told and what the complaint alleges was true.

Investor Harm and Market Reaction

Investor losses were significant and unfolded in waves. The March 2025 disclosure erased more than half of the company’s market value in a single session. Subsequent disclosures compounded those losses as confidence deteriorated further.

These declines were tied directly to revelations about billing practices, payer relationships, and regulatory scrutiny. They were not routine market movements. They reflected a reassessment of the company’s financial integrity.

Investors who relied on reported revenue growth found themselves exposed to what the complaint describes as artificially inflated results. Once those figures were called into question, the stock repriced quickly and severely.

Litigation and Procedural Posture

The case, Beidel v. Zynex, Inc., et al., is pending in the U.S. District Court for the District of Colorado under Case No. 1:26-cv-00714. The class period runs from February 25, 2021 through December 15, 2025.

The complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act, alleging materially false and misleading statements and control person liability.

Defendants include founder and former CEO Thomas Sandgaard, COO Anna Lucsok, CFO Daniel Moorhead, and members of the company’s audit committee and board.

Plaintiffs allege that senior leadership knew of insurer complaints, internal concerns, and regulatory risks but continued to present a narrative of legitimate growth. The complaint also asserts that board members failed to intervene and instead approved actions such as share repurchases that reinforced investor confidence.

Shareholder Sentiment

Investor sentiment evolved alongside the disclosures. Before March 2025, Zynex was often viewed as a growth-oriented medical device company with a compelling recurring revenue model. Many investors focused on its expanding salesforce and increasing order volume.

After the Tricare suspension, sentiment shifted. Initial reactions reflected confusion about how a major payer could abruptly halt payments. As more information became available, skepticism grew. Discussions across investor forums began to question whether the company’s reported growth had been sustainable or accurate.

Following the bankruptcy filing, sentiment largely turned negative. Investors framed the situation as a cautionary example of the importance of revenue quality and regulatory oversight, particularly in healthcare businesses that depend on insurance reimbursement.

Analyst Commentary

Analyst coverage also shifted over time. Prior to 2025, analysts emphasized Zynex’s high-margin consumables business and its ability to scale through salesforce expansion. Revenue growth and order volume supported a positive outlook.

After the Tricare disclosure, analysts began highlighting payer concentration risk and uncertainty surrounding reimbursement. Concerns about compliance and billing practices led to downgrades and reduced price targets.

Following the July 2025 disclosures, analyst commentary focused more heavily on governance issues and the lack of visibility into future performance. By the time of the bankruptcy filing, forward-looking projections had largely been withdrawn, replaced by assessments tied to legal and regulatory outcomes.

SEC Filings & Risk Factors

Zynex’s SEC filings acknowledged certain risks related to its reliance on third-party payers. The company disclosed that insurers could deny claims, delay payments, or request refunds, and that billing disputes were common in the industry.

The complaint alleges that these disclosures were incomplete. While general risks were described, plaintiffs argue that the company failed to disclose the extent of ongoing billing practices, insurer complaints, and regulatory scrutiny.

This distinction is central to the case. Investors were warned about potential risks. They were not, according to the complaint, informed that those risks had already materialized.

Conclusion: Implications for Investors

This case centers on the difference between reported growth and underlying business reality.

Zynex presented a model built on recurring revenue and expanding demand. Investors allege that model depended on billing practices that were not sustainable and not disclosed.

When that gap became visible, the market adjusted quickly.

For investors, the takeaway is grounded in fundamentals. Revenue quality matters. Dependence on reimbursement carries risk.

Disclosures must reflect not just possibilities, but known conditions.

Here, that alignment is now being tested in court.

How to Join the Zynex, Inc. (ZYXI) Class Action

• Confirm you purchased ZYXI shares during the class period (February 25, 2021 – December 15, 2025)
• Review eligibility details based on your transactions
• Click here to check eligibility

Disclaimer: This shareholder alert is for informational purposes only and does not constitute legal advice. Consult a qualified attorney for personalized guidance. No specific outcomes are guaranteed.