The US Securities and Exchange Commission (SEC) has today charged Laura Tyler Perryman—the former chief executive officer (CEO) and co-founder of Florida-based medical device startup Stimwave Technologies—with defrauding investors out of approximately US$41 million by making “false and misleading statements” about one of the company’s key products.
According to the SEC’s complaint, the medical device comprised several components, one of which was a fake, non-functional component that was implanted into patients’ bodies.
The SEC’s complaint alleges that, during capital fundraising events from 2018 through 2019, Perryman made “material misrepresentations” about Stimwave’s peripheral nerve stimulation (PNS) device, which purported to treat chronic nerve pain by delivering electrical signals to targeted nerves.
The device in question consisted of three key components: a transmitter, a receiver, and an electrode array. The transmitter was worn by patients in a pouch outside the body and sent a wireless signal into the body. A receiver and electrode array were implanted inside patients’ bodies and, used in combination, were supposed to receive the signal and convert it into electrical currents that stimulated target nerves.
As alleged, Stimwave included two receivers of different sizes with its PNS device—the smaller of which was designed to be used when the larger receiver was too big to implant. The SEC’s complaint alleges that Perryman “knew, or was reckless in not knowing”, that the smaller receiver was, in reality, “fake and nothing more than a piece of plastic”.
According to the complaint, Perryman misrepresented to investors that the PNS device was approved by the US Food and Drug Administration (FDA) and was the only effective device of its kind on the market. The complaint also alleges that Perryman made false and misleading statements to investors about Stimwave’s historical revenues, revenue projections, and business model.
After Perryman’s fraud unravelled in the fall of 2019, Stimwave voluntarily recalled its PNS devices and eventually filed for bankruptcy, announcing the sale of its business in June 2022.
“We allege that Perryman touted a supposedly innovative medical pain-relief device while concealing that a primary component of the device was fake, and that patients were unwittingly undergoing unnecessary surgeries to implant the non-functional component into their bodies,” said Monique C Winkler, director of the SEC’s San Francisco Regional Office. “Investors are entitled to know material information about the products of the companies in which they invest. The SEC is committed to holding bad actors accountable.”
The SEC’s complaint—filed in the US District Court for the Southern District of New York—charges Perryman with violating the antifraud provisions of the federal securities laws. The SEC is seeking permanent injunctions, including a conduct-based injunction, disgorgement plus prejudgment interest, a civil penalty, and an officer and director bar.
In a parallel action, also announced on 19 December, the US Attorney’s Office for the Southern District of New York filed a superseding indictment against Perryman that added criminal securities fraud charges to the fraud charges levelled at her by the SEC.
Perryman was originally arrested on the morning of 9 March 2023, and presented to the US District Court for the Southern District of Florida later that same day. A press release issued by the US Attorney’s Office for the Southern District of New York at the time detailed the filing of a two-count indictment charging Perryman in connection with “a scheme to create and sell a non-functioning dummy medical device for implantation into patients suffering from chronic pain, resulting in millions of dollars in losses to federal healthcare programmes”.
The release states that Perryman had been charged with one count of conspiracy to commit wire fraud and healthcare fraud, which carries a maximum potential sentence of 20 years in prison, and one count of healthcare fraud, which carries a maximum potential sentence of 10 years in prison.
In addition, Damian Williams—US Attorney for the Southern District of New York—announced details from a non-prosecution agreement with Stimwave, which had been entered into on 29 October 2022. Under the terms of this previously sealed agreement, the company accepted responsibility for its conduct by, among other things: making admissions and stipulating to the accuracy of an extensive Statement of Facts; paying a US$10 million monetary penalty; and maintaining an adequate compliance programme going forward, as well as agreeing to cooperate fully with the US government.
“As alleged, at the direction of its founder and CEO Laura Perryman, Stimwave created a dummy medical device component—made entirely of plastic—designed to be implanted in patients for the sole purpose of causing doctors to unwittingly bill Medicare and private insurance companies more than US$16,000 for each implantation of the piece of plastic,” said Williams. “The defendant and Stimwave did this so that they could charge medical providers many thousands of dollars for purchasing their medical device. Our Office will continue to do everything in its power to bring to justice anyone responsible for perpetuating healthcare fraud—which, in this case, led to patients being used as nothing more than tools for financial enrichment.”