throbber
Case 2:22-cv-02165 Document 1 Filed 07/13/22 Page 1 of 35
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`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF LOUISIANA
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`Plaintiff,
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`------------------------------------------------------- X
`BKK Solutions, LLC f/k/a BCK Medical
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`Holdings, LLC,
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`X
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`v. Sensiva Health LLC, Tarun Jolly, Jim
`Silliman, and Ben Williamson,
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`Defendants.
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`-------------------------------------------------------
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`Civil Action No._____________
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`
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`District Judge __________
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`Magistrate Judge __________
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`COMPLAINT
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`1.
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`In late 2020, at the height of the Covid-19 pandemic, Defendant Sensiva Health, LLC
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`(“Sensiva”) rushed development of new personal testing kits, known as the “reAct” kit, which
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`were designed to detect the presence of Covid-19 in users. These kits, however, would prove to
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`be ineffective and unsuitable for any market because they did not detect Covid-19 accurately and
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`had much shorter shelf lives than was represented on the packaging. Unsurprisingly, reAct kits
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`were never authorized for sale by the FDA and, indeed, Sensiva abandoned its efforts to obtain
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`such regulatory approval.
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`2.
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`Sensiva’s losses from this failed venture were minimal or non-existent, however, because
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`Sensiva and its controlling persons (“Defendants”) had duped Plaintiff BKK Solutions, LLC
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`(“BKK”) into investing more than $10 million in this doomed business, with such investment
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`covering Sensiva’s costs of production, shipping, storage and marketing. Sensiva fraudulently
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`obtained this investment from BKK through numerous misrepresentations and omissions.
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`Case 2:22-cv-02165 Document 1 Filed 07/13/22 Page 2 of 35
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`3.
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`Specifically, Defendants, who knew full well that BKK had no expertise in the FDA’s
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`regulatory approval process, directly assured BKK on multiple occasions that regulatory approval
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`was guaranteed and imminent because, at any time, Sensiva could submit reAct for approval
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`through a special process with the United States Department of Health and Human Services
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`(“HHS”), which Sensiva represented was an alternative to the FDA approval process and would
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`provide “automatic” approval within two weeks. Although BKK did not know it at the time, this
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`alternate approval process through HHS was pure fiction, invented by Defendants to give BKK a
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`false impression that reAct shortly would receive regulatory approval.
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`4.
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`Sensiva also failed to disclose known issues with reAct that rendered it ineffective and
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`unmarketable, including its inability to detect the presence of Covid-19 accurately and its short
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`shelf life. Instead, Sensiva provided an express warranty that reAct would be free from material
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`defects. Sensiva also continued to misrepresent the quality of the reAct kits even after the tests
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`were criticized by the FDA, international governmental regulators, and customers. Sensiva did
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`not disclose any issues with the reAct kits to BKK until one year after BKK’s investment, at which
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`point Sensiva disclosed that the kits could not be sold in the United States, contrary to their own
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`prior guidance. By that point in time, Sensiva had developed a competing product in secret, which
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`was functionally the same as reAct but that, apparently, did not include the same product defects
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`as reAct.
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`5. Based on Sensiva’s fraudulent misrepresentations, BKK invested $9.8 million in early
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`2021 to cover all of Sensiva’s production costs for approximately 1.6 million units of the reAct
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`kits, all of which have proven to be unmarketable and useless. In further reliance on Sensiva’s
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`fraudulent misrepresentations, BKK continued to invest over $150,000 throughout 2021 to pay
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`-2-
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`Case 2:22-cv-02165 Document 1 Filed 07/13/22 Page 3 of 35
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`third parties to transfer, store, and market this ineffective product, both domestically and
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`internationally.
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`6. BKK never would have made such a significant investment in Sensiva if it had known
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`either that (i) automatic approval by HHS was not a real process that Sensiva could pursue, or that
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`(ii) reAct was not free from material defects, as had been warranted expressly.
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`7. BKK seeks recovery for damages, lost profits, and all other appropriate amounts under
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`Sections 10(b) and 20(a) of the Securities Exchange Act, as well as under Louisiana state law
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`causes of action that this Court may consider pursuant to its supplemental jurisdiction.
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`JURISDICTION AND VENUE
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`8. BKK asserts claims that arise under Section 10(b) of the Securities Exchange Act, 15
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`U.S.C. § 78j(b), Rule 10b-5 promulgated thereunder by the SEC, 17 C.F.R. § 240.10b-5, and
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`Section 20(a) of the Exchange Act, 15 U.S.C. § 78t-1. Accordingly, this Court has subject matter
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`jurisdiction over these claims under 28 U.S.C. § 1331 and 15 U.S.C. § 78aa.
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`9. BKK also asserts claims under Louisiana state law. Such claims are so related to the
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`claims arising under the Exchange Act that they form part of the same case or controversy under
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`Article III of the United States Constitution. Accordingly, this Court may assert supplemental
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`jurisdiction over such claims pursuant to 28 U.S.C. § 1367(a).
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`10. Venue is proper in this judicial district pursuant to 28 U.S.C. § 1391(b) and Section 27
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`of the Exchange Act, 15 U.S.C § 78aa.
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`11. BKK and Sensiva are parties to a Distribution and Reseller Agreement dated December
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`24, 2020 (the “Agreement”).1 Section 32 of the Agreement states that all parties consent to the
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`1 In an abundance of caution as concerns any claim of confidentiality, the Agreement is not attached hereto. The
`provisions discussed herein do not concern any purportedly confidential information.
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`-3-
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`Case 2:22-cv-02165 Document 1 Filed 07/13/22 Page 4 of 35
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`“exclusive jurisdiction” of “State or Federal Courts in Orleans Parish, Louisiana” regarding the
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`claims asserted herein.
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`PARTIES
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`12. Plaintiff BKK is a Florida limited liability company, which was formerly known as BCK
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`Medical Holdings, LLC.
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`13. Defendant Sensiva is a Louisiana limited liability company.
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`14. Defendant Tarun Jolly (“Jolly”) is a Louisiana resident who is an owner and principal for
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`Sensiva. When Sensiva was founded in March 2020, Jolly was its sole member and manager.
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`Jolly has since continued to sign corporate filings on behalf of Sensiva. Although Plaintiff
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`presently is unaware of Jolly holding a formal title at Sensiva, Jolly acted as the primary decision
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`maker with respect to the events and activities alleged herein. Upon information and belief, Jolly
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`is the majority or largest owner of Sensiva and assisted in the development of the reAct kits, along
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`with Jim Silliman.
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`15. Defendant Jim Silliman (“Silliman”) is the Chief Executive Officer for Sensiva. Upon
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`information and belief, he is a resident of Louisiana.
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`16. Defendant Ben Williamson (“Williamson”) is the Chief Operating Officer for Sensiva.
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`Upon information and belief, he is a resident of Florida.
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`17. Defendants Jolly, Silliman, and Williamson each exercised control over Sensiva and are
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`referred to as “Control Defendants” herein.
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`-4-
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`Case 2:22-cv-02165 Document 1 Filed 07/13/22 Page 5 of 35
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`BACKGROUND
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`I.
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`Sensiva Attempts To Capitalize On Public Demand For Covid-19 Test Kits With A
`Product That Would Require Outside Investment
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`18.
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`In late 2020, market demand for effective, safe, and reliable Covid-19 testing kits greatly
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`exceeded supply in the United States and throughout the world. In this context, many companies
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`were working quickly to develop testing kits that could be sold to the public.
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`19. Sensiva, which describes itself on its website as a “healthcare solutions company,”
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`developed plans for a saliva-based test kit, which would have the brand name “reAct.” The reAct
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`tests purportedly were designed to provide consumers with both (i) a quick testing result through
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`a saliva-based rapid antigen test, and (ii) a more thorough testing result from a PCR laboratory
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`testing of a saliva sample. Sensiva’s marketing materials for the reAct tests suggested that they
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`could provide accurate and reliable results in as little as three minutes, allowing clients to test large
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`groups of people in very short amounts of time. Sensiva also advertised reAct as being able to
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`detect all variants of COVID-19.
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`20. Sensiva, however, faced several significant issues that prevented it from commercializing
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`the reAct test in late 2020/early 2021.
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`21. First, in late 2020, Sensiva had not received approval from the FDA to sell reAct in the
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`United States. In fact, Sensiva did not even apply for approval until December 17, 2020.
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`22. Second, upon information and belief, Sensiva knew or should have known that the reAct
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`tests suffered from severe efficacy and quality control issues. Specifically, the tests did not provide
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`an effective means of detecting Covid-19 and, even when they worked, they had much shorter
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`shelf lives than Sensiva stated publicly. These issues created a substantial risk that Sensiva might
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`never be able to obtain FDA approval for reAct.
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`-5-
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`Case 2:22-cv-02165 Document 1 Filed 07/13/22 Page 6 of 35
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`23. Third, upon information and belief, Sensiva knew or should have known that there were
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`material problems with the EUA application that it had submitted to the FDA. Specifically,
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`Sensiva sought to have reAct approved by comparing it to an approved PCR test from an affiliated
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`entity, but Sensiva improperly used this comparator test in a way that had not been approved by
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`the FDA, which undermined the comparison. Further, upon information and belief, Sensiva
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`violated FDA guidance by choosing not to test the reAct kits on samples including low viral loads,
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`where the presence of Covid-19 would be harder to detect. As a result of these and other issues,
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`some of which still may be unknown to BKK today, Sensiva knew or should have known that FDA
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`approval was unlikely.
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`24. Fourth, even if there were a reasonable prospect of obtaining FDA approval, Sensiva
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`lacked sufficient financial resources to purchase essential components for the reAct tests in
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`quantities necessary to enable mass production of the kits. Sensiva knew that it would require a
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`significant investment from one or more third-party investors to get its reAct business off the
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`ground. Although Sensiva, alone, would need to address the first three issues, Sensiva hatched a
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`plan to address the fourth issue by seeking out third-party investment to fund Sensiva’s costs of
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`production. However, Sensiva knew it could only attract such an investor by fraudulently
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`concealing the first three issues.
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`II.
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`Sensiva Convinces BKK To Invest In ReAct Based On False Assurances Of Imminent
`Regulatory Approval
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`25. Sensiva found the investor it was looking for in BKK’s predecessor in interest, BCK
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`Investments, LLC (“BCK Investments”), which was a holding company owned by Ben
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`Kazenmaier (“Kazenmaier”).
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`26.
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` BCK Investments invested in a company owned by Kevin Griffon (“Griffon”), who had
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`worked on the successful sale and distribution of PCR nasopharyngeal swabs throughout the
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`-6-
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`Case 2:22-cv-02165 Document 1 Filed 07/13/22 Page 7 of 35
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`United States and, accordingly, had the resources, contacts, and experience required to distribute
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`the reAct kits. Kazenmaier was able to assist Griffon with logistics and sourcing capital.
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`27. Sensiva and BKK, through BCK Investments, met in early December 2020 based on a
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`pre-existing friendship between Allen Frederic (“Frederic”), who served as an advisor to BCK
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`Investments, and Sensiva’s attorney who served as legal counsel to Sensiva. Frederic was a former
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`partner at the same law firm where Sensiva’s attorney was a current partner.
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`28. Sensiva and BKK, through BCK Investments, held their first meeting on December 15,
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`2020, before Sensiva had submitted its initial application to the FDA, at BCK Investments’ office
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`in New Orleans. For BCK Investments, the meeting was attended by Kazenmaier, Frederic, and
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`Griffon. For Sensiva, the meeting was attended by Jolly and Sensiva’s attorney.
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`29. At this initial meeting, the parties discussed a variety of topics, which included the reAct
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`test kits, Sensiva’s capital needs, and BCK Investments’ distribution contacts.
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`30. As Sensiva was aware, BCK Investments intended to form a special purpose entity to
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`invest in the reAct business and distribute the kits to customers. This special purpose entity would
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`become known as BCK Medical Holdings, LLC, which is the former name of BKK.
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`31. As discussed in this and subsequent meetings, BKK was expected to serve two roles: (1)
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`to provide the funding to cover Sensiva’s costs for manufacturing reAct, and (2) to retain third-
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`party distributors to sell reAct domestically. Sensiva represented that it would be able to perform
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`all manufacturing and logistical sourcing on its own, so long as BKK covered the costs of Sensiva’s
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`efforts.
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`32. Sensiva also represented that BKK only would need to locate domestic distributors
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`because Sensiva purportedly had already lined up a sales agent to handle international sales. In
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`-7-
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`Case 2:22-cv-02165 Document 1 Filed 07/13/22 Page 8 of 35
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`truth, Sensiva’s agent had not yet done anything to pursue sales in any international market or even
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`to understand the regulatory hurdles it would face if it attempted to market reAct internationally.
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`33. Following the success of the initial meeting on December 15, a second meeting was held
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`between Jolly, Sensiva’s attorney, Kazenmaier, Frederic, and Griffon on or around December 17.
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`This second meeting was when the parties first discussed the FDA approval process for reAct.
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`34. On December 17, after BKK and Sensiva had already begun negotiations, Sensiva
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`submitted its application to the FDA. Shortly after doing so, Sensiva informed BKK by email that
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`“we are able to start using and selling [reAct] instantly.”
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`35. At all relevant times, Sensiva knew that no one at BKK had any experience with the FDA
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`approval process and, as such, BKK was entirely reliant on Sensiva to provide accurate and honest
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`representations regarding the likelihood and timeline for FDA approval of reAct. Sensiva also
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`knew that BKK likely would rely on Sensiva’s guidance regarding the regulatory approval process
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`because Sensiva had retained regulatory counsel and BKK did not (and did not need to). This
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`knowledge presented Sensiva with an opportunity to conceal the critical issues that it knew or
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`should have known it would face obtaining regulatory approval for reAct.
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`36. At the second meeting, Jolly and Sensiva’s attorney informed Kazenmaier, Griffon, and
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`Frederic that Sensiva already had applied for reAct to the FDA, but that Sensiva did not know the
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`timing on when such approval would be granted. Neither Jolly nor Sensiva’s attorney suggested
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`that approval might not be granted; they only stated that approval could be delayed. Jolly and
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`Sensiva’s attorney also stated that they expected a response soon from the FDA, based on their
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`prior experience seeking FDA approvals.
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`37. Of course, a material delay in FDA approval would be highly concerning to any potential
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`investor or distributor, so Sensiva sought to provide additional (and false) assurance that approval
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`-8-
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`Case 2:22-cv-02165 Document 1 Filed 07/13/22 Page 9 of 35
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`was imminent. Specifically, Jolly stated to Kazenmaier, Griffon, and Frederic that even if the
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`FDA approval were delayed, there was an “alternative” route to approval that Sensiva could obtain
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`by filing a request with HHS. According to Jolly, approval by HHS would be granted
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`“automatically” within two weeks once an application was filed.
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`38. During a phone call between Frederic and Sensiva’s attorney in late December 2020,
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`Sensiva’s attorney, on Sensiva’s behalf, again represented that this HHS alternative existed and,
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`as a result, January 15 was the “outside date” upon which regulatory approval would be granted.
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`39. As a direct result of Sensiva’s fraudulent misrepresentations of there being an
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`“automatic” path to approval in just two weeks under this alternate procedure with HHS, BKK
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`reasonably believed in mid-December 2020 that approval for reAct would be obtained by mid-
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`January 2021. Given the seemingly imminent approval, the international sales agent that
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`purportedly had already been retained, and the fact that Sensiva appeared to be pursuing other
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`potential investors, BKK believed that it would need to act quickly to capitalize on this seemingly
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`lucrative opportunity. That is precisely the mindset that Sensiva had hoped to create.
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`40.
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`In truth, approval was not imminent and Sensiva knew it because the HHS alternative
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`did not exist and Sensiva had not already retained an international sales agent. Moreover, upon
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`information and belief, Sensiva knew or should have known of significant issues set forth above
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`regarding reAct and its EUA application. Yet Sensiva did not disclose these issues—or the non-
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`existence of the HHS alternative—to BKK at any time.
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`III.
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`Sensiva Quickly Obtains BKK’s Investment And Participation In The ReAct Business
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`41. Based on Sensiva’s false assurances that approval was imminent, Kazenmaier directed
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`Frederic to negotiate with Sensiva’s attorney a definitive agreement between Sensiva and BKK,
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`through BCK Investments. Those negotiations began on December 17, 2020.
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`-9-
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`Case 2:22-cv-02165 Document 1 Filed 07/13/22 Page 10 of 35
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`42. Within 24 hours, Sensiva and BKK agreed that BKK would make an investment in
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`Sensiva’s reAct business pursuant to the following terms:
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`a. BKK would finance the manufacturing of reAct kits by covering all of Sensiva’s
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`production costs;
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`b. BKK would sell reAct domestically, which Sensiva knew would be accomplished
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`through third-party distributors retained at BKK’s expense;
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`c. Sensiva and BKK would split profits 60/40 from those third parties’ eventual sale
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`of the reAct kits to consumers; and
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`d. BKK would remain the exclusive distributor so long as they met all of Sensiva’s
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`financing requirements within 48 hours’ notice.
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`43. Sensiva, through its attorney, provided BKK, through Frederic, with an initial draft of an
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`agreement to document this transaction on or around December 23, 2020. This draft was structured
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`as a distribution and reseller agreement but contained the basic terms of an investment as described
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`above.
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`44. When presenting this draft, Sensiva’s attorney warned Frederic that Sensiva already had
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`other potential distributors lined up who would be willing to make a similar investment and,
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`accordingly, Sensiva was not willing to engage in any substantive renegotiation of any term in the
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`draft. Effectively, Sensiva presented its proposed investment terms under “take it or leave it”
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`conditions.
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`45. To induce BKK’s investment with minimal review or input, Sensiva’s attorney, on behalf
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`of Sensiva, again stated to Frederic, on behalf of BKK, that regulatory approval for reAct was
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`imminent, either through the FDA or through the HHS. Sensiva’s attorney stated explicitly that
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`regulatory approval would be obtained through one of these alternatives by “January 15 or
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`-10-
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`Case 2:22-cv-02165 Document 1 Filed 07/13/22 Page 11 of 35
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`thereabouts.” These statements were false, as Sensiva knew that the HHS alternative did not exist
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`and that Sensiva had no way of knowing if or when the FDA would approve reAct.
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`46. The draft agreement also contained an express warranty by Sensiva that the reAct kits
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`would be “free from material defects in material and workmanship under normal use and service
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`with proper maintenance for the time of their intended use following manufacturing.” This, too,
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`was false. Unbeknownst to BKK, the reAct kits were not free from material defects. They could
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`not detect Covid-19 accurately or reliably, particularly in samples with lower viral loads, and they
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`expired well before the expiration of their stated “time of . . . intended use following
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`manufacturing.” Sensiva sought to conceal such issues in its EUA application, and it similarly
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`sought to conceal them from BKK during their negotiations. This false warranty was repeated in
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`the Agreement.
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`47. Seeking to act on this supposedly lucrative investment opportunity before Sensiva passed
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`it to a competitor, and fully relying on the false representations stated above, BKK signed the
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`Agreement on December 24, 2020, less than one week after Frederic and Sensiva’s attorney first
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`began negotiating BKK’s investment in Sensiva’s reAct business and less than 48 hours after
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`receiving the initial draft from Sensiva.
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`48. The Agreement represents that Sensiva’s initial production capabilities would be 50,000
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`units per week and that it was expected that this weekly manufacturing capability would increase
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`over time. The Agreement also represents that Sensiva intended to reach a point where it would
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`be able to manufacture 2,350,000 units on a weekly basis. This amount is referred to in the
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`Agreement as the “Minimum Weekly ROFR reACT Capacity Amount.”
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`49. According to the Agreement, so long as Sensiva had not yet reached the Minimum
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`Weekly ROFR reACT Capacity Amount, BKK would have the “exclusive right to acquire all or
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`-11-
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`Case 2:22-cv-02165 Document 1 Filed 07/13/22 Page 12 of 35
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`any portion of” the units produced, without exception. However, once Sensiva hit the Minimum
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`Weekly ROFR reACT Capacity Amount, it only would need to offer BKK a right of first refusal
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`to purchase the units within 48 hours. In such a scenario, BKK would be required to purchase all
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`of the available capacity or else it would lose its exclusivity rights in the future.
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`50.
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`In either scenario, the purchase price that BKK would need to pay was “the price paid”
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`by one of Sensiva’s manufacturers “to source components and manufacture [reAct] test kits.”
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`Thus, Sensiva realized no profit from “selling” the reAct kits to BKK. Instead, both Sensiva and
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`BKK expected to realize profits only after third parties retained by BKK sold the kits to ultimate
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`customers and then shared 60% of the profits with Sensiva.
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`51. As a result of this Agreement, Sensiva could manufacture as many units as it wanted and
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`force BKK to fund all production costs for those units under threat of BKK losing its exclusivity.
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`If BKK wished to keep its exclusivity, its potential investment under this Agreement had no limit.
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`Such predatory and one-sided terms were deemed acceptable by BKK only because of the express
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`misrepresentations made by Sensiva, including those regarding approval being imminent by the
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`FDA or HHS.
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`52. The Agreement is governed by Louisiana law.
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`IV.
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`Sensiva Demands Nearly $10 Million In Investment From BKK While Continuing To
`Conceal The Truth And Repeat Its Fraudulent Misrepresentations
`
`53. On January 10, 2021, Sensiva first notified BKK that its initial production capacities
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`would enable it to produce 300,000 test kits by the end of January, with 150,000 units being
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`produced during the weeks of January 21 and January 28. In order to fund the manufacturing of
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`these 300,000 units, Sensiva gave BKK 48 hours to make an advance payment of $1.8 million.
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`BKK duly made this payment on January 10.
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`-12-
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`54. On January 18, 2021, Sensiva and BKK amended the Agreement to include a provision
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`that made it mandatory, once FDA approval was obtained, for BKK to purchase all kits that
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`Sensiva produced on a weekly basis up to the Minimum Weekly ROFR reACT Capacity Amount.
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`55. Just two days later, on January 20, 2021, Jolly and Sensiva’s attorney met with
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`Kazenmaier, Griffon, and Frederic at BKK’s office to discuss a significant issue with a Chinese
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`company that provided the primary components for the reAct kits. According to Jolly and
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`Sensiva’s attorney, the Chinese company was threatening to shut down for a full month to celebrate
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`the Chinese New Year unless Sensiva made an upfront payment of $7-$8 million dollars. Sensiva
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`requested that BKK make this investment and treat it as an advanced payment for an additional
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`1.3 million units. Sensiva’s attorney stated falsely that this was a “notice of manufacturing
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`capacity” under the Agreement, which, if true, might trigger BKK’s 48-hour payment obligation.
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`56.
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`In truth, BKK had no obligation to fund this additional $8 million investment. Unlike
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`BKK’s initial payment of $1.8 million to fund production of 300,000 kits, this investment was
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`untethered to Sensiva’s manufacturing capabilities. Sensiva did not provide any indication that it
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`would be able to manufacture 1.3 million units or that $8 million would correctly represent
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`Sensiva’s costs for doing so. This $8 million investment was, instead, an unexpected necessity
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`just to ensure manufacturing was not paused for a month due to Sensiva’s failure to manage its
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`own relationship with its own manufacturers properly.
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`57. Naturally, BKK objected to making such a large investment when (1) it had no
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`contractual obligation to do so, (2) the initial 300,000 kits that it had paid for had not yet been
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`manufactured, and (3) Sensiva had not yet obtained authorization to sell these kits in the United
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`States.
`
`-13-
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`Case 2:22-cv-02165 Document 1 Filed 07/13/22 Page 14 of 35
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`58. To induce BKK to make this investment that it had no obligation to make, Jolly, on behalf
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`of Sensiva, again dangled the prospect of an imminent approval from the FDA or HHS during the
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`meeting on January 20, 2021. These representations continued to be false. Yet, they served their
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`intended purpose of incentivizing BKK to continue to invest in this business.
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`59. On January 21, 2021, Sensiva’s attorney, Jolly, and Frederic participated in a phone call
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`to further discuss the $8 million investment. During this call, Frederic asked Jolly about the (non-
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`existent) HHS alternative. Given the repeated misrepresentations that such an alternative existed,
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`Frederic asked for an “outside date” by which Sensiva would pursue that alternative if Sensiva still
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`had not received approval from the FDA. Jolly stated that March 15, 2021, would be a reasonable
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`deadline by which Sensiva should pursue the HHS deadline, unless the FDA had given some
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`indication of imminent approval.
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`60. Sensiva’s misrepresentations worked. Based on the false assurance that the HHS
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`alternative existed and likely would be pursued no later than March 15, BKK agreed to make the
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`$8 million investment.
`
`61. BKK and Sensiva amended the Agreement on January 27, 2021, to reflect this additional
`
`investment. Under this amendment, the $8 million investment was structured as an “advance” for
`
`which BKK would receive a 20% finance fee and “such number of reACT Test Kits equal to the
`
`Advance divided by six,” which is approximately 1.3 million units. BKK would be permitted to
`
`deduct the full amount of this investment plus the 20% finance fee from all future payments under
`
`the Agreement until BKK received the 1.3 million kits, which was expected to occur by March 15,
`
`2021.
`
`62. BKK made this $8 million investment on January 28, 2021. Consistent with Sensiva’s
`
`misrepresentation that the HHS alternative existed and likely would be pursued no later than March
`
`-14-
`
`

`

`Case 2:22-cv-02165 Document 1 Filed 07/13/22 Page 15 of 35
`
`15, 2021, BKK financed this $8 million investment primarily with a loan bearing a maturity date
`
`of March 15, 2021.
`
`63. As a result of investing a total of $9.8 million in Sensiva’s reAct business, BKK received
`
`1.6 million reAct kits (including the 300,000 that it acquired earlier in January 2021) that it would
`
`need to sell to customers for BKK (and Sensiva) to realize a profit. The $9.8 million investment
`
`covered Sensiva’s costs, meaning that only BKK had any financial risk if these kits could not be
`
`sold.
`
`64. BKK never would have invested $9.8 million in Sensiva’s business, or invested tens of
`
`thousands of dollars in start-up costs, if not for the express assurances from Sensiva that there was
`
`an “automatic” process to have reAct approved by HHS within two weeks, nor would BKK have
`
`made such investment if Sensiva had disclosed the existence of material defects with reAct that
`
`might preclude FDA approval. Even after executing the Agreement, BKK had no affirmative
`
`obligation to make these payments, but it did so in express reliance on Sensiva’s false
`
`representations.
`
`65. On January 31, 2021, Jolly, on behalf of Sensiva, represented to BKK in an email that
`
`“FDA [approval] is an inevitability that may not happen as fast as we like, but should happen
`
`soon.” This unambiguous assurance that approval was “inevitable” is consistent with the
`
`numerous fraudulent representations that Sensiva already had made to BKK.
`
`66. At the same time that Sensiva was demanding a nearly $10 million investment from
`
`BKK, Sensiva submitted a second EUA application to the FDA in January 2021 and a third
`
`application in February 2021. These subsequent applications included significant changes to
`
`reAct’s description of its testing steps, product manufacturing, and assay buffer composition.
`
`Despite these significant changes, Sensiva’s subsequent applications continued to rely in the same
`
`-15-
`
`

`

`Case 2:22-cv-02165 Document 1 Filed 07/13/22 Page 16 of 35
`
`validation testing that had been submitted with its first application in December 2020. Upon
`
`information and belief, Sensiva knew that this was inappropriate because the FDA required such
`
`testing to be performed on the final product to be approved.
`
`V.
`
`BKK Engages Sales Agents, Who Are Unable To Sell ReAct Without Regulatory
`Approval
`
`67. As Sensiva knew or should have known, BKK did not intend to sell the reAct kits itself
`
`but would, instead, engage third-party sales agents to make such sales. Aside from funding
`
`Sensiva’s manufacturing costs, BKK’s only obligations would be administrative. To the extent
`
`that any sales agent or customer had questions about the product, such questions would need to be
`
`addressed by Sensiva directly.
`
`68. By the end of February 2021, BKK had engaged the Elizarov Consulting Group (“ECG”)
`
`and several other independent sales agents to sell reAct. By March 15, 2021, ECG, alone, sent
`
`reAct samples to more than 80 potential customers. They also reached out to dozens of other
`
`potential customers who did not request samples. Some of the customers contacted by ECG had
`
`the capacity to purchase all available inventory if they had had an interest in doing so.
`
`69.
`
`In addition to ECG, BKK also retained other sales agents with contacts and expertise in
`
`particular industries, which allowed BKK to reach other potential buyers.
`
`70. As Sensiva was aware, the plan to sell reAct in the United States prior to regulatory
`
`approval depended on customers having an interest in buying at a “pre-approval” discount. But
`
`such an option was only attractive to potential customers so long as they believed approval was
`
`imminent. The longer it took for this approval to be obtained, the less attractive such discounted
`
`sales became for customers.
`
`71. Moreover, none of the potential customers had heard of the HHS alternative and, in
`
`hindsight, it appears likely that the sales agents’ discussion of this alternative, which they did not
`
`-16-
`
`

`

`Case 2:22-cv-02165 Document 1 Filed 07/13/22 Page 17 of 35
`
`know to be a work of fiction created by Sensiva, hurt their credibility when speaking with
`
`sophisticated customers.
`
`72. At the end of the March 2021, Sensiva still had not obtained approval from the FDA and
`
`did not pursue approval through the fictional procedure with HHS, nor could they. Absent
`
`regulatory approval, BKK’s sales agents were unable to generate any interest in reAct among
`
`potential customers in the United States, who reasonably were wary of purchasing unapproved
`
`testing kits in a market where approved alternatives were becoming increasingly more common.
`
`VI.
`
`Sensiva Fails To Obtain FDA Approval And Lies About Submitting A Second
`Application, All While Developing A Competing Product In Secret
`
`73.
`
`If there truly was an alternative method to approval through HHS that functioned as
`
`Sensiva had

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