SEC Charges Former CEO of Medical Device Startup Stimwave with $41 Million Fraud

Introduction to the Stimwave Controversy

On December 19, 2023, the SEC filed a complaint alleging a scheme by Laura Tyler Perryman, the ex-CEO and co-founder of Stimwave Technologies Inc.  Perryman is accused of duping investors with false claims about a critical medical device, parts of which were fraudulently deemed functional.

The Deceptive Components of Stimwave’s Device

The SEC’s complaint points to Stimwave’s peripheral nerve stimulation device (PNS Device), designed to alleviate chronic nerve pain through electrical nerve targeting. This device was composed of a trio of critical parts: a transmitter worn outside the body, an implanted receiver, and an electrode array. However, the SEC asserts that one of these components was nothing more than a sham – a fake piece of plastic presented as a functional part of the device.

Perryman’s Misleading Claims to Investors

During the crucial capital-raising phase between 2018 and 2019, Perryman allegedly made several false statements to investors. The SEC’s complaint highlights her claims that the PNS Device was the sole effective device of its kind in the market, misleading investors about its FDA approval status. Furthermore, the accusations extend to her providing inaccurate information about Stimwave’s financial health, including its revenue history and projections, and the overall business model.

The Aftermath of the Fraudulent Scheme

In late 2019, Stimwave voluntarily recalled the PNS Devices and ultimately filed for bankruptcy. This action was taken after it was discovered that patients had undergone needless surgeries to implant the non-functional component of the device.

Legal Repercussions for Perryman

The legal ramifications for Perryman are severe. The SEC’s complaint, filed in the U.S. District Court for the Southern District of New York, accuses her of breaching federal securities laws’ antifraud provisions. The SEC seeks comprehensive penalties, including permanent injunctions, financial disgorgement with interest, a significant civil penalty, and a ban on Perryman holding any officer or director position.

In a related development, the U.S. Attorney’s Office for the Southern District of New York has escalated its criminal charges against Perryman, adding severe securities fraud allegations.

SEC Press Release

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