FRAUDSTERS BUY JET SKIS, HOMES WITH INVESTOR CASH!

SEC v. Biogenic, Inc., Diagnostic Link Ltd, LLC, Vital Systems Ltd LLC, et al. — U.S. Securities and Exchange Commission Litigation Release No. 26294, dated April 29, 2025.

The SEC charged six Michigan companies and four individuals with defrauding over 55 investors out of more than $7 million by selling bogus investment contracts for medical testing devices. Defendants falsely claimed the devices were manufactured by their companies and generated significant passive income, when in reality, they were purchased cheaply, rarely used by doctors, and investor payments were funded by new investors' money.

In Plain English

Imagine someone selling you a special machine that they claim will make you money just by being used in a doctor's office. They promise you'll get a lot of money back, like $10,000 every month! But, they don't actually make the machines themselves, and doctors hardly ever use them. The money you get back isn't from the machines working, but from new people buying into the same fake deal. This is like a house of cards – it looks good for a while, but it's built on lies and will eventually fall.

Disclaimer: all facts are drawn from the SEC's own filings; the claims described are allegations unless and until a court rules or the parties settle, and some cases end in dismissal.

How the Alleged Scheme Worked

1. Offer Bogus Investment Contracts Beginning in June 2017, defendants offered investment contracts for a supposed 'World-Class' and 'Life Saving' medical testing device that performed 'comprehensive neuropathic cardiovascular diagnostics'.
2. Promise High Passive Income Defendants claimed investors would receive $250 in 'passive income' every time the device was used in a doctor's office, and that over 1,400 devices were already earning existing investors more than $10,000 per month.
3. Misrepresent Device Origin Contrary to claims that the Biogenic Entities manufactured the devices, they were actually purchased from a third party for a small fraction of the roughly $150,000 paid by investors.
4. Exaggerate Device Usage Defendants falsely stated that their entities had over 1,400 devices in use, when in fact fewer than 70 devices were ever purchased, and doctors seldom used them, often storing them or returning them.
5. Fabricate Usage Reports When doctors failed to use the machines, Julie Ann Youssef and Zachari Cargnino sent investors fake usage reports and billing invoices to create the illusion of device activity and income generation.
6. Use Ponzi Payments for Returns Investors did not receive income from device usage. Instead, purported 'passive income' payments were funded by money received from new investors, a classic Ponzi scheme tactic.
7. Misappropriate Investor Funds The Cargninos used millions of dollars of defrauded investor money for personal luxuries, including vacation rentals, jet skis, a trailer, and three residential properties.

The Enforcement Action

On February 20, 2025, the SEC obtained a final judgment ordering total monetary relief of over $17 million against Zachari Cargnino and Susann Cargnino, Gary Youssef and Julie Ann Youssef, and six Michigan-based companies. The defendants were charged with conducting a medical device scam that defrauded at least 55 investors out of over $7 million. All defendants, without admitting or denying the allegations, consented to the entry of judgment on liability and permanent injunctive relief for violations of antifraud and registration provisions. The court ordered defendants to disgorge nearly $8.7 million in illicit profits and prejudgment interest and to pay nearly $8.3 million in civil penalties.

Named in this action: Biogenic, Inc., Diagnostic Link Ltd, LLC, Vital Systems Ltd LLC, BioTek Holdings LLC, Tek Wellness Inc., Capital Care Management LLC.

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