Zynex Investors Face Deadline Amid Fraud Allegations in Class Action Lawsuit

Investors in Zynex, Inc. (NASDAQ: ZYXI) are under a tight deadline to join a securities fraud lawsuit that could reshape the company’s future. The class action, led by law firm Faruqi & Faruqi, LLP, alleges Zynex executives misled investors about the company’s billing practices and financial risks, resulting in a catastrophic collapse of its stock price. With the May 19, 2025, deadline for investors to seek lead plaintiff status fast approaching, the case highlights the perils of overstocking schemes and regulatory scrutiny in the medical device sector.

The Allegations: Overstocking, Fraud, and Regulatory Fallout

At the heart of the lawsuit are claims that Zynex systematically shipped excessive quantities of medical supplies—such as electrodes and batteries—to patients, far exceeding their actual needs. These alleged practices, detailed in a 2024 report by medical news outlet STAT, were reportedly used to inflate revenue by billing insurers for unnecessary supplies. Key points include:
- False Statements: Between March 2023 and March 2025, Zynex allegedly omitted risks tied to its billing practices, including scrutiny from insurers like Tricare, the U.S. military’s health program.
- Revenue Inflation: The overstocking scheme allegedly allowed Zynex to boost revenue artificially, misrepresenting its financial health to investors.
- Regulatory Scrutiny: By March 2025, Tricare had suspended payments to Zynex over billing disputes, triggering a $3.59 per share (51.3%) stock plunge the following day.

The Stock’s Trajectory: A Free Fall After Truth Emerges

The lawsuit underscores how delayed disclosures and regulatory action devastated investor confidence. Two pivotal events marked the unraveling:
1. June 4, 2024: Following the STAT report exposing Zynex’s billing practices, the stock fell 5% to $9.35 per share amid heavy trading volume.
2. March 12, 2025: After Zynex revealed a revenue shortfall due to Tricare’s payment suspension, shares plummeted to $3.41—a 51.3% single-day drop—on record volume.

Legal Implications and Investor Risks

Faruqi & Faruqi is pursuing claims under Sections 10(b) and 20(a) of the Securities Exchange Act, which prohibit fraud and hold executives liable for misleading statements. The case seeks to recover losses for investors who bought shares during the alleged misconduct period. Critical factors include:
- Deadline Pressure: Investors must act by May 19, 2025, to be considered for lead plaintiff status, which oversees litigation.
- Whistleblower Role: The firm encourages former employees or shareholders with insider knowledge to come forward, potentially strengthening the case.

Conclusion: A High-Stakes Crossroads for Zynex Investors

The Zynex lawsuit illustrates the consequences of financial misstatements in a heavily regulated industry. With its stock down over 60% since early 2023 (from a high of $14.50), the company faces not only legal penalties but also reputational damage that could deter future partnerships with insurers.

Crucially, the case’s outcome hinges on the lead plaintiff’s ability to prove Zynex’s intent to mislead. If successful, the settlement could compensate investors for losses tied to artificially inflated prices. However, even if the company settles, its ability to recover financially may depend on addressing the root causes of the scandal: overstocking and regulatory noncompliance.

For now, the May 19 deadline looms large. Investors holding ZYXI shares during the class period must decide whether to pursue legal recourse—or accept the steep losses as a cautionary tale in corporate transparency.

This analysis is based on public records and press releases. Investors are advised to consult legal counsel for personalized advice.