Statement Summary
The U.S. Securities and Exchange Commission (SEC) has secured a final judgment against six Michigan companies and four individuals involved in a fraudulent medical device scheme that defrauded over 55 investors of more than $7 million. The defendants, including Zachari and Susann Cargnino, Gary and Julie Ann Youssef, misled investors by promoting non-existent medical testing devices that purportedly generated passive income. Instead of real returns, the payments to investors came from new investor funds. The SEC’s investigation, filed in September 2021, culminated in a February 2025 judgment that mandated the defendants to pay over $17 million in total, including $8.7 million in disgorged profits and civil penalties, alongside injunctive relief to prevent future violations.
Original Statement
Biogenic, Inc., et al.
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 26294 / April 29, 2025
Securities and Exchange Commission v. Biogenic, Inc., Diagnostic Link Ltd, LLC, Vital Systems Ltd LLC, BioTek Holdings LLC, Tek Wellness Inc., Capital Care Management LLC, Susann Ashley Cargnino a/k/a Susann Ashley Walker a/k/a Ashley Walker, Zachari Alan Cargnino a/k/a Zach Alan, Julie Ann Youssef a/k/a Julie Ann a/k/a Julie Joseph, and Gary Youssef a/k/a Gary Joseph, No. 5:21-cv-12236-MFL-DRG (E.D. Mich. filed Sept. 23, 2021)
SEC Obtains Final Judgment Against Fraudulent Medical Device Scam
On February 20, 2025, the Securities and Exchange Commission obtained a final judgment ordering total monetary relief of over $17 million against Zachari Cargnino and Susann Cargnino of Michigan, Gary Youssef and Julie Ann Youssef of California, and six Michigan-based companies who were charged with conducting a medical device scam for at least three years that defrauded at least 55 investors out of over $7 million.
According to the SEC’s complaint, the Youssefs and Cargninos used six Michigan-based companies, which the Cargninos controlled, to offer bogus investment contracts to buy supposed “World-Class” and “Life Saving” medical testing devices. The complaint alleged that the defendants claimed that the devices would provide *passive income* every time the device was used in a doctor’s office. The complaint further alleged that the defendants made numerous false claims about the investment opportunity, including that the defendant entities manufactured the devices, the amount of passive return on investment that could be earned by investors, the entities’ history of success, and the number of devices put into use by defendants. In fact, the complaint alleged, doctors seldom used the devices.
According to the complaint, after investors bought devices and the doctors failed to use the machines, Julie Ann Youssef and Zachari Cargnino sent investors fake usage reports and falsely communicated to investors that payments they had received were derived from device usage and payments from doctors when, in reality, the payments came from new investor money. The complaint further alleged that the Cargninos used millions of dollars of defrauded investor money to buy vacation rentals, *jet skis* and a trailer, and three residential properties in Manitou Beach, Michigan.
The SEC filed its complaint in the United States District Court for the Eastern District of Michigan on September 23, 2021. Ultimately all defendants, without admitting or denying the allegations in the complaint, consented to the entry of judgment on liability and permanent injunctive relief against them for violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. All defendants other than Capital Care Management LLC also consented to the entry of judgment on liability and permanent injunctive relief against them for violations of the registration provisions of Section 5 of the Securities Act of 1933.
The Youssefs consented to liability and injunctive relief contemporaneously with the filing of the complaint. The Cargninos and defendant entities consented to liability and injunctive relief after the SEC filed its motion for summary judgment against them. The court entered judgments on defendants’ liability while reserving judgment on financial remedies.
The court’s February 20, 2025 final judgment granted the SEC’s motion for entry of final judgment and monetary relief, and ordered defendants to disgorge nearly $8.7 million in illicit profits and prejudgment interest and to pay nearly $8.3 million in civil penalties.
The SEC’s investigation was conducted by Matthew B. Reisig, under the supervision of Tim England. The litigation was handled by Anna Area and Daniel Maher, and supervised by David Nasse.
