Investigation of LifeMD, Inc.
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LifeMD, Inc. (LFMD) Misled Investors Regarding its Business Operations
Throughout the class period, defendants made false and/or misleading statements regarding its business. Specifically, defendants failed to disclose that: (1) many of its executives were associated with Redwood Scientific when it was charged for unlawful autoshipping, abusive telemarketing, and false claims, and that they employed similar practices at the Company; (2) LifeMD engaged in autoshipping products to unwilling customers to record recurring revenue and the Company made it difficult to cancel such subscriptions; (3) certain of the purportedly licensed physicians on the Company’s platform were not in fact licensed and faced disciplinary action; (4) as a result of the foregoing practices, the Company was reasonably likely to face regulatory scrutiny and/or reputational harm; and (5) as a result of the foregoing, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis.
On April 14, 2021, Culper Research issued a report alleging that “LifeMD appears to use unlicensed doctors to dispense OTC medications, has implemented an autoshipping/autobilling scheme, failed to honor guarantees, and put in place abusive telemarketing practices.” The report also alleged that several of the Company’s executives were involved in “wide ranging fraud” at Redwood Scientific prior to joining LifeMD, which was charged by the U.S. Federal Trade Commission for “unlawful autoshipping, abusive telemarketing, and false claims.” On this news, the Company’s share price fell 24% to close at $9.00 per share on April 14, 2021.