Case 2:21-cv-01273-WSS Document 1-2 Filed 09/23/21 Page 1 of 70
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`Case 2:21-cv-01273-WSS Document 1-2
`
`Supreme Courtof'Pennsylvania
`Court of Common Pleas
`Civil:Cover Sheet
`
`ALLEGHENY County
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`Filed 09/23/21 Page 2 of 70
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`For Prothonotary Use Only:
`
`Docket No:
`
`The information collected on this form is used solely for court administration purposes. This form does not
`supplement or replace the filing and service of pleadings or other papers as required by law or rules of court.
`
`Commencement of Action:
`E3| Complaint [ Writ of Summons
`[ Transfer from Another Jurisdiction
`
`O petition
`] Declaration of Taking
`
`Lead Plaintiff’s Name:
`JUSTIN SCHREIBER
`
`Lead Defendant’s Name:
`CHRISTIAN MATTHEW LAMARCO
`
`I No
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`Are money damages requested? [X] Yes
`
`[Jwithin arbitration limits
`[Floutside arbitration limits
`
`Dollar Amount Requested:
`(check one)
`
`Is this a Class Action Suit? COYes [ No
`
`Is this an MDJ Appeal? [ Yes [ No
`
`Name of Plaintiff/Appellant’s Attorney: S. MANOJ JEGASOTHY, ESQUIRE AND JESSICA G. LUCAS, ESQUIRE
`
`[ Check here if you have no attorney (are a Self-Represented |Pro Se| Litigant)
`) ) P
`
`Nature of the Case:
`
`Place an “X” to the left of the ONE case category that most accurately describes your
`PRIMARY CASE. If you are making more than one type of claim, check the one that
`you consider most important.
`
`TORT (do not include Mass Tort)
`D Intentional
`] Malicious Prosecution
`] Motor Vehicle
`[] Nuisance
`[] Premises Liability
`] Product Liability (does not include
`mass tort)
`[¥] Slander/Libel/ Defamation
`[ Other:
`
`MASS TORT
`[ Asbestos
`[[] Tobacco
`] Toxic Tort - DES
`[ Toxic Tort - Implant
`[ Toxic Waste
`[] Other:
`
`CONTRACT (do not include Judgments)
`D Buyer Plaintiff
`] Debt Collection: Credit Card
`] Debt Collection: Other
`
`] Employment Dispute:
`Discrimination
`] Employment Dispute: Other
`
`[ Other:
`
`CIVIL APPEALS
`Administrative Agencies
`] Board of Assessment
`] Board of Elections
`
`Dept. of Transportation
`Statutory Appeal: Other
`
`[ Zoning Board
`O Other:
`
`PROFESSIONAL LIABLITY
`[ Dental
`[ Legal
`] Medical
`] Other Professional:
`
`REAL PROPERTY
`D Ejectment
`] Eminent Domain/Condemnation
`] Ground Rent
`] Landlord/Tenant Dispute
`[ Mortgage Foreclosure: Residential
`] Mortgage Foreclosure: Commercial
`[] Partition
`] Quiet Title
`[ Other:
`
`MISCELLANEOUS
`[ Common Law/Statutory Arbitration
`] Declaratory Judgment
`Mandamus
`Non-Domestic Relations
`Restraining Order
`Quo Warranto
`Replevin
`Other:
`
`Updated 1/1/2011
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`
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`Case 2:21-cv-01273-WSS Document 1-2 Filed 09/23/21 Page 3 of 70
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`IN THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY, PENNSYLVANIA
`
`LIFEMD, INC.; : CIVIL DIVISION
`JUSTIN SCHREIBER, : Case No. GD- 21-011364
`and
`COMPLAINT
`
`STEFAN GALLUPPI,
`
`Plaintiffs, + Filed on behalf of Plaintiffs
`V. : Counsel for this party:
`CHRISTIAN MATTHEW LAMARCO; : S. Manoj Jegasothy, Esquire
`
`PA ID No. 80084
`SHADYSIDE PARTNERS, LLC :
`(d/b/a CULPER RESEARCH); : Jessica G. Lucas, Esquire
`: PAID No. 311280
`
`and
`
`: Gordon Rees Scully Mansukhani, LLP
`JOHN/JANE DOES 2-10 : 707 Grant Street, Suite 3800
`(individuals, corporations, organizations, or : Pittsburgh, PA 15219
`
`other legal entities whose names and addresses : Tel: (412) 577-7400
`are presently unknown and who worked with or : Fax: (412) 347-5461
`
`Jfor the named defendants and/or provided : mjegasothy(@grsm.com
`
`substantial assistance or encouragement to same ¢ jlucas@grsm.com
`
`in the form of financial, information, or legal :
`
`support), : JURY TRIAL DEMANDED
`Defendants.
`
`NOTICE TO PLEAD:
`
`To: Defendants, Christian Matthew Lamarco, Shadyside
`Partners, LL.C (d/b/a Culper Research), and
`John/Jane Does 2-10:
`
`YOU ARE HEREBY NOTIFIED TO PLEAD TO THE
`ENCLOSED COMPLAINT WITHIN TWENTY (20)
`DAYS FROM THE SERVICE HEREOF OR A
`DEFAULT JUDGMENT MAY BE ENTERED
`AGAINST YOU.
`
`/s/ Jessica G, Lucas, Esquire
`Jessica G, Lucas, Esquire
`Counsel for Plaintiffs
`
`
`
`
`
`
`
`
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`Case 2:21-cv-01273-WSS Document 1-2 Filed 09/23/21 Page 4 of 70
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`NOTICE
`
`You have been sued in court. If you wish to defend against the claims set forth in the following
`pages, you must take action within twenty (20) days after this complaint and notice are served, by
`entering a written appearance personally or by attorney and filing in writing with the court your
`defenses or objections to the claims set forth against you. You are warned that if you fail to do so
`the case may proceed without you and a judgment may be entered against you by the court without
`further notice for any money claimed in the complaint or for any other claim or relief requested by
`the plaintiff. You may lose money or property or other rights important to you.
`
`YOU SHOULD TAKE THIS PAPER TO YOUR LAWYER AT ONCE. IF YOU DONOT HAVE
`A LAWYER, GO TO OR TELEPHONE THE OFFICE SET FORTH BELOW. THIS OFFICE
`CAN PROVIDE YOU WITH INFORMATION ABOUT HIRING A LAWYER.
`
`IF YOU CANNOT AFFORD TO HIRE A LAWYER, THIS OFFICE MAY BE ABLE TO
`PROVIDE YOU WITH INFORMATION ABOUT AGENCIES THAT MAY OFFER LEGAL
`SERVICES TO ELIGIBLE PERSONS AT A REDUCED FEE OR NO FEE.
`
`Allegheny County Bar Association
`400 Koppers Building
`436 Seventh Avenue
`Pittsburgh, PA 15219
`(412) 261-6161
`
`
`
`
`
`
`
`
`Case 2:21-cv-01273-WSS Document 1-2 Filed 09/23/21 Page 5 of 70
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`IN THE COURT OF COMMON PLEAS OF ALLEGHENY COUNTY, PENNSYLVANIA
`LIFEMD, INC.;
`CIVIL DIVISION
`JUSTIN SCHREIBER,
`
`Case No. GD- 21-011364
`and
`
`STEFAN GALLUPPI,
`
`Plaintiffs,
`V. JURY TRIAL DEMANDED
`CHRISTIAN MATTHEW LAMARCO; .
`
`SHADYSIDE PARTNERS, LLC
`(d/b/a CULPER RESEARCH);
`
`and
`
`JOHN/JANE DOES 2-10
`(individuals, corporations, organizations, or
`other legal entities whose names and addresses
`are presently unknown and who worked with or for
`the named defendants and/or provided substantial
`assistance or encouragement to same in the form of
`financial, information, or legal support),
`Defendants.
`COMPLAINT
`Plaintiffs, LifeMD, Inc. (“LifeMD”), Justin Schreiber (“Schreiber”), and Stefan Galluppi
`(“Galluppi™) (collectively “Plaintiffs”), by undersigned counsel, hereby file this Complaint against
`Defendants, Christian Matthew Lamarco (“Lamarco”), Shadyside Partners, LLC (d/b/a “Culper
`
`Research”), and John/Jane Does 2-10 (collectively “Defendants™), averring as follows:
`
`NATURE OF ACTION
`
`1. This action arises from a classic “short and distort” stock scheme. In a “short and
`
`distort” stock scheme, short-sellers borrow securities, sell them, and then drive the price of their
`
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`Case 2:21-cv-01273-WSS Document 1-2 Filed 09/23/21 Page 6 of 70
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`target company’s stock down by spreading materially false, misleading, defamatory, and
`disparaging information about the company. Once the company’s stock drops to an artificially
`low price, the short-sellers repurchase and return the borrowed securities, pocketing the difference.
`This is precisely what Defendants, known and unknown short-sellers, have done against Plaintiffs.
`
`2. Plaintiffs bring this action for claims of defamation, trade libel, false light, unjust
`enrichment, deceptive trade practices, unfair competition, conspiracy, and aiding and abetting to
`recover damages and secure injunctive relief against Defendants for their intentional and malicious
`scheme to manipulate the securities markets in order to secure a quick and illegal financial
`windfall, by disseminating and publishing false, misleading, defamatory, offensive, and
`disparaging statements about Plaintiffs.
`
`3. These statements falsely accused Plaintiffs of fraud, lies, cover-ups, potential
`crimes and illegal acts, insider dealing, and abusive, unfair, and deceptive business practices.
`
`4, These statements caused significant harm to Plaintiffs, including artificial
`depression of LifeMD’s stock price and market value; higher costs of capital; expenses to defend
`against class action lawsuits and negative media attention; damage to business relationships with
`contractual partners, investors, bankers, and other lenders; injury to Plaintiffs’ reputation and
`goodwill; emotional pain, suffering, and humiliation for the individual Plaintiffs; and disruption
`of the business affairs of LifeMD, which continues to this day as Plaintiffs seek to attract investors,
`recruit talent, and form strategic partnerships.
`
`JURISDICTION & VENUE
`
`5. This Court has subject matter jurisdiction over this matter pursuant to 42 Pa. Cons.
`Stat. § 931.
`6. This Court has personal jurisdiction over Lamarco, Culper Research, and John/Jane
`
`
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`
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`Case 2:21-cv-01273-WSS Document 1-2 Filed 09/23/21 Page 7 of 70
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`Does pursuant to 42 Pa. Cons. Stat. §§ 5301 and 5322 because, on information and belief, they
`purposefully availed themselves of the benefits and protections of the Commonwealth of
`Pennsylvania by, among other things, working with or for Lamarco, a resident of Pittsburgh,
`Pennsylvania transacting business in and outside this County, to cause harm by acts or omissions
`in Pennsylvania, as set forth below, and caused harm in Pennsylvania and elsewhere by acts or
`omissions outside Pennsylvania, as set forth below.
`
`7. This Court is a proper venue pursuant to Pa. R. Civ. P. 302 and 2179 because, on
`information and belief, the acts and/or injuries that give rise to the claims asserted herein occurred,
`in whole or in part, in this County.
`
`PARTIES
`
`8. Plaintiff LifeMD, Inc. is a direct-to-consumer, publicly traded telehealth company
`incorporated under the laws of Delaware.
`
`9. Plaintiff Justin Schreiber is an individual residing in Dorado, Puerto Rico, 00646.
`Schreiber is LifeMD’s Chairman and CEO.
`
`10. Plaintiff Stefan Galluppi is an individual residing in Huntington Beach, California
`92649. Galluppi is LifeMD’s Chief Technology Officer (CTO).
`
`11. Defendant Christian Matthew Lamarco is an individual residing at 3934 Foster
`Street, B410, Pittsburgh, PA 15201.
`
`12. Defendant Shadyside Partners, LLC (d/b/a “Culper Research”) is a limited liability
`company under the laws of Delaware that publishes purported “investigative investment research”
`reports through its website at www.culperresearch.com and through postings on Twitter as
`
`@CulperResearch.
`
`
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`Case 2:21-cv-01273-WSS Document 1-2 Filed 09/23/21 Page 8 of 70
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`13. On information and belief, Lamarco is the sole member of Culper Research; owns
`and controls Culper Research; and, at all relevant times, directed, authorized, and/or was
`responsible for false and defamatory statements made about, and tortious acts against, Plaintiffs
`by Culper Research.
`
`14. Defendants John/Jane Does 2—-10, whose true names are unknown, are individuals
`or entities who worked with or for Lamarco and/or Culper Research and provided substantial
`assistance or encouragement to same (e.g., financial, information, legal support) in connection
`with false and defamatory statements made about, and tortious acts against, Plaintiffs by Lamarco
`and/or Culper Research, and include, on information and belief, members, partners, affiliates,
`employees, consultants, clients, investors, agents, and/or counsel of or for Lamarco and/or Culper
`Research. Plaintiffs will seek leave of court to amend this Complaint and insert the true names of
`John/Jane Does 2-10 in place of their fictitious names when Plaintiffs discover the same.
`
`FACTUAL ALLEGATIONS
`Background Information
`
`15. LifeMD™ is a leading telehealth company that is transforming the healthcare
`landscape with direct-to-patient product and service offerings. LifeMD’s telemedicine platform
`enables virtual access to affordable and convenient medical treatment from licensed providers and,
`when appropriate, prescription medications and over-the-counter products delivered directly to the
`patient’s home.
`
`16. LifeMD offers a full range of subscription-based proprietary telehealth products
`and services, including REX MD™ —telehealth for men, Shapiro MD™—telehealth for hair loss,
`and NavaMD™—teledermatology offering for women.
`
`17. LifeMD strives to build telemedicine brands that combine best-in-class virtual care
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`with prescription medications (if appropriate) and patented over-the-counter products supported
`by thought-leading medical providers.
`
`18. LifeMD began as a start-up, financed through multiple rounds of venture capital
`funding. In doing so, some of the most sophisticated institutional investors and advisors in the
`world have conducted countless hours of extensive due diligence validating LifeMD prior to
`investing.
`
`19. LifeMD maintains a network of licensed medical providers and doctors who are
`board certified to treat patients and dispense prescription medications.
`
`20. LifeMD takes the utmost care in creating an environment that fosters the highest
`standard of care for patients. All medical providers prescribing medications for LifeMD brands
`are regularly monitored for good standing by a third-party company that governs compliance for
`critical industries such as telehealth.
`
`21. LifeMD is managed by a scasoned team of experienced and dedicated
`
`professionals, including:
`
`a) Justin Schreiber (Chairman & CEO) ~ Schreiber has deep experience in both
`healthcare and finance and was the largest direct investor in LifeMD prior to the
`Company raising its first round of institutional capital. Schreiber also serves as the
`President and founder of JLS Ventures, an investment and capital markets advisory
`firm that invests in and consults with emerging growth publicly traded companies.
`In addition to his capital markets experience, Schreiber previously worked for a
`global healthcare consulting firm as well as in the foreign currency trading business.
`He holds a BS in International Business from Elizabethtown College and a BA in
`International Management from the ICN Ecole de management in Nancy, France;
`and
`
`b) Stefan Galluppi (CTO) — Stefan Galluppi was the Chief Operating Officer and CTO
`of Immudyne, a predecessor to LifeMD. Galluppi combines over 10 years of
`experience in building technology platforms for direct to consumer marketing
`campaigns. Previously, he served as the CTO of Runaway Products, a DRTV driven
`marketing firm with a core focus on building and optimizing systems to scale
`campaigns for maximum efficiency and profitability.
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`22, Culper Research is purportedly a stock research firm that disseminates its research
`
`reports throughout Pennsylvania and the United States via its website, www.culperresearch.com.
`
`and through other media. It also represents itself to the public as an anonymous short-seller.
`
`23. InJune 2019, Culper Research formed as a limited liability company in Delaware
`and created its presence on the web for the apparent purpose of destroying the reputations of, and
`causing harm to, various publicly traded companies, including LifeMD.
`
`24, Culper Research undertook to appear to the public as a reputable stock research
`firm by creating an entity with the term “Research” in the name, referring to itself as involved in
`long and short equity research, purporting to undertake extensive inquiry into LifeMD’s (and other
`companies’) operations, and even referring to each of its publications as “research reports.”
`
`25. Legitimate stock research firms, however, do not attempt to hide or conceal the
`authors of their work, are typically affiliated with an investment bank, or seek to engage clients to
`receive ongoing research reports directly by subscription, and do not seek to hide the compensation
`they might receive from issuing “research reports.”
`
`26. Culper Research, in conjunction with Lamarco and Does, has engaged in abusive
`“short-selling” of companies” stocks to reap massive profits at the expense of these companies and
`their shareholders—the very same fraudulent scheme that they have now deployed against
`Plaintiffs.
`
`27. Culper Research, in conjunction with Lamarco and Does, has a history of
`publishing unfounded, fraudulent “research reports” about companies as part of their short-selling
`schemes.
`
`28. Several other companies, including CytoDyn, Inc., Blink Charging, and
`
`CleanSpark, Inc., have been victim to Defendants’ scheme, i.e., publishing highly inflammatory
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`Case 2:21-cv-01273-WSS Document 1-2 Filed 09/23/21 Page 11 of 70
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`and derogatory “investigative research” reports to drive down the stock price and generate short
`seller gains for Defendants.
`
`Defendants Publish False and Defamatory Statements about Plaintiffs
`
`29. On or about April 14, 2021, Culper Research published a false and defamatory
`report about Plaintiffs on its website www.culperresearch.com and via Twitter using
`@CulperResearch titled, LifeMD, Inc. (LFMD): Redwood Redux at RexMD (the “Report”)
`(attached hereto as Ex. 1).
`
`30. The Report was published, without attribution to a specific author’s name(s), on
`Culper Research’s professional-looking website, complete with legal liability disclaimers, terms
`of service, copyright protection warnings, and a “Contact Us” submission form.
`
`31. By calling themselves “Culper Research™ and using an image of an American
`patriot on their website, Defendants promoted themselves as a source to be trusted for valuable
`and helpful information.
`
`32. The Report was distributed globally on the internet, and has been disseminated or
`linked to other websites, including but not limited to the investor site seekingalpha.com and
`threadreaderapp.com.
`
`33. Specifically, Defendants made and published false, misleading, defamatory,
`offensive, and disparaging statements about Plaintiffs in the Report, such as the following:
`
`a. Redwood Scientific. “Importantly, LifeMD executives — including CEO Justin
`Schreiber, CTO Stefan Galluppi, and the Company’s two former CFOs — have
`apparently covered up their involved [sic] in Redwood Scientific’s ‘wide ranging
`fraud’, which we think LifeMD now mirrors.” Report at 2. “Undisclosed to current
`LifeMD investors, numerous LFMD insiders were intimately involved in varying
`aspects of Redwood [Scientific]’s ‘wide-ranging fraud.”” Jd. “We are highly
`concerned that LifeMD executives have not disclosed their involvement in material
`fraud, namely in Redwood Scientific, prior to joining LifeMD. We find this
`
`especially concerning in light of the business practices we believe are occurring at
`LifeMD which mirror those that landed Redwood federal charges.” Id. at
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`3. Furthermore, the Defendants not only executed the fraud at Redwood, but after
`it was discovered, were found to have lied and obstructed the Courts, hiding their
`millions in illicit proceeds generated from the scheme. We believe many of these
`same practices have made their way to LifeMD, where the Company is now
`subjecting itself to the same risks.” Id. “Apparently, unbeknownst to LifeMD
`investors, at least 4 current and past LifeMD executives were intricately involved
`in Redwood.” Id. at 4. “LifeMD’s corporate presentation touts its supposed
`‘proven management team’ yet the slide conspicuously omits Schreiber and
`Galluppi’s involvement in the Redwood Scientific Fraud.” Jd. “LifeMD Practices
`Mirror the Redwood Scientific Fraud.” Id. at 5. “In light of the Company’s
`apparent cover-up of involvement in the ‘wide-ranging fraud’ at Redwood (per the
`FTC), we are particularly concerned by LifeMD practices which we think mirror
`those at Redwood.” Jd. “Apart from the Company’s apparent use of unlicensed
`doctors to dispense pills, we think LifeMD’s current business practices mirror the
`same ones which landed Redwood in hot water.” Id. at 10.
`
`b. Unlicensed Doctors. “Namely, LifeMD appears to use unlicensed doctors to
`dispense OTC medications ...” Report at 2. “Not only does this render LifeMD’s
`claims patently false, but potentially leaves the Company liable as an instrument to
`felony distribution of controlled substances.” Id. “Redwood even claimed a
`revolutionary product for erectile dysfunction, just as LifeMD now apparently sells
`OTC ED pills relying on unlicensed doctors.” Id. at 3. “This suggests, in our view,
`that LifeMD is either willfully ignorant of its doctors, or complicit in felonious
`acts.” Id. at 7. “Apart from the Company’s apparent use of unlicensed doctors to
`dispense pills, we think LifeMD’s current business practices mirror the same ones
`which landed Redwood in hot water.” 7d. at 10.
`
`¢. [Insider Transactions. “That said, this torrential cash burn hasn’t stopped LFMD
`insiders from using the Company as a personal piggy bank. In 2020, $37.0 million
`in stock compensation was paid to insiders, not to mention numerous related party
`transactions. CEQO Schreiber’s father warehouses and fulfills the Company’s
`Shapiro MD shampoo orders, and LifeMD paid CEO Schreiber 900,000 shares in
`2019—an exorbitant sum—merely for credit card processing services.” Report at
`2-3. “At LifeMD, Insiders Win While Common Shareholders Lose.” Id. at 15.
`“Despite the Company’s torrential cash burn, insiders have collected health
`paychecks.” Id. “This sheer level of insider enrichment concerns us, given
`Schreiber’s propensity to participate in stock promotion schemes in which common
`shareholders are left holding the bag.” Id. “Stock awards aside, insiders have
`enriched themselves via related-party transactions.” Jd.
`
`d. Deceptive Business. “Namely, 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.” Report at 2. “In October 2018, Redwood was charged by the FTC for
`‘wide-ranging fraud” which implemented unlawful autoshipping, abusive
`telemarketing, and false claims of its products. At LifeMD, numerous customer
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`reviews lead us to believe that the Company has implemented the same tactics.
`LifeMD touts its ‘recurring revenue’ model yet we think much of the Company’s
`revenues are generated under false pretenses of ‘one-time purchases’.” Id. “In
`short, we think LifeMD’s business is fatally flawed, unsustainable, and likely to
`draw regulatory scrutiny, especially in light of Schreiber and Galluppi’s histories.”
`Id. at 5. “Instead, we think LifeMD is a cash-burning direct marketing response
`business. The core driver of Rex MD, the Company’s pill-pushing business, is a
`paid search and web marketing operation which only incinerates more shareholder
`cash over time.” Id. at 8. “Apart from the Company’s apparent use of unlicensed
`doctors to dispense pills, we think LifeMD’s current business practices mirror the
`same ones which landed Redwood in hot water. Namely, numerous customer
`reviews allege that the Company engages in autoshipping, makes cancellations
`difficult if not impossible, and telephones consumers possibly in violation of TCPA
`laws.” Id. at 10. “We think that a business whose core strength is built upon
`customer deception is unsustainable.” Id. at 12.
`
`e. Cover-Up & Lies. “Importantly, LifeMD executives — including CEO Justin
`Schreiber, CTO Stefan Galluppi, and the Company’s two former CFOs — have
`apparently covered up their involved [sic] in Redwood Scientific’s ‘wide ranging
`fraud’, which we think LifeMD now mirrors.” Report at 2. “Finally, while LFMD
`disclosed in 2016 that CTO Stefan Galluppi previously served as Redwood’s CTO,
`this disclosure was removed from Company materials in 2017, and Galluppi omits
`this ‘experience’ from his LinkedIn biography, effectively covering up involvement
`from current LifeMD investors.” Id. “Not only does this render LifeMD’s claims
`patently false, but potentially leaves the Company liable as an instrument to felony
`distribution of controlled substances.” Id. “LifeMD Executives Omit ‘Wide
`Ranging’ Redwood Scientific Fraud from Their Resumes.” Id. at 3. “We are
`highly concerned that LifeMD executives have not disclosed their involvement in
`material fraud, namely in Redwood Scientific, prior to joining
`LifeMD.” Id. “Apparently, unbeknownst to LifeMD investors, at least 4 current
`and past LifeMD executives were intricately involved in Redwood.” Id. at 4.
`“LifeMD’s corporate presentation touts its supposed ‘proven management team’
`yet the slide conspicuously omits Schreiber and Galluppi’s involvement in the
`Redwood Scientific Fraud.” /d. “However, in the Company’s 2017 Form 10-K,
`the Company has removed all references to Redwood, suggesting, in our view, a
`cover-up attempt.” Jd. at 5. “In light of the Company’s apparent cover-up of
`involvement in the ‘wide-ranging fraud’ at Redwood (per the FTC), we are
`particularly concerned by LifeMD practices which we think mirror those at
`Redwood.” Id. “We remain unclear as to whether this was due to a change in
`service providers or if LifeMD is merely once again selectively disclosing negative
`information to investors.” Id. at 16. “Appendix: LifeMD Has Hidden Past
`Involvement in Redwood Scientific.” Id.
`
`34. Overall, these statements falsely accused Plaintiffs of fraud, lies, cover-ups,
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`potential crimes and illegal acts, insider dealing, and abusive, unfair, and deceptive business
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`practices.
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`35. Defendants presented these false statements, by content and context, as factual
`statements, not opinion.
`
`36. Indeed, Defendants portrayed the statements as their investigative findings—in an
`“Investigative Investment Research” 19-page document containing graphs, pictures, charts,
`screenshots, and an appendix—on fraud, concealment, criminal activity, insider dealings, and
`deceptive marketing practices committed by Plaintiffs.
`
`37. Defendants’ purported “research” and representation that “all information
`contained herein is accurate and reliable, and has been obtained from public sources we believe to
`be accurate and reliable” added to the factual context of the Report.
`
`38. Readers of the Report relied and acted on the Report. As discussed below, financial
`analysts published negative “investor alerts” about LifeMD, while lawyers published “class action
`notices” and then filed class action lawsuits against LifeMD.
`
`39. Further, the media reported that the Report “made serious accusations against
`LifeMD” such as that “LifeMD and its executives are engaged in fraudulent and criminal business
`activities,” LifeMD “uses unlicensed professional ‘to dispense OTC medication,” “LifeMD is
`engaged in fraudulent and illegal activities that are similar to those of Redwood Scientific, a
`company that faced severe legal penalties at the hands of the U.S. Federal Trade Commission
`(FTC) back in 2018,” and LifeMD engages in “unlawful autoshipping, abusive telemarketing, and
`false claims of its products.” See, e.g.,:
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`https://www.fool.com/investing/2021/04/14/why-lifemd-stock-is-getting-crushed-today/;
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`https://www.fool.com/investing/2021/04/19/why-lifemd-stock-is-plunging-today/.
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`40. Each of Defendants’ false and defamatory statements are capable of being proven
`true or false. Plaintiffs either did or did not engage in fraud, lie, cover-up, commit crimes or illegal
`acts, deal in unfair insider transactions, or deceive consumers. And Plaintiffs did not.
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`Patently False Redwood Scientific Statements
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`41. The Report distorts LifeMD executives’ involvement with Redwood Scientific
`Technologies, Inc. (“Redwood Scientific”), by falsely stating and implying that Schreiber and
`Galluppi were engaged in fraud committed by Redwood Scientific.
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`42, No current or former member of LifeMD’s management team had a management
`role or significant equity ownership in Redwood Scientific at any time.
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`43. Schreiber held only a passive investment and non-controlling interest in the
`company.
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`44. Galluppi served as Redwood Scientific’s CTO, but he held no equity in the
`company and tendered his resignation in October 2015, departing more than two and a half years
`prior to the FTC action against Redwood Scientific.
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`45, The fact that Schreiber and Galluppi had no involvement in any fraud by Redwood
`Scientific is confirmed by the public filings in Federal Trade Commission v. Cardiff, et al., 5:18-
`cv-02104 (C.D. Cal. 2018).
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`46. The FTC sued Redwood Scientific, controlling individuals, and related entities,
`asserting unfair and deceptive trade practices.
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`47. Neither Schreiber nor Galluppi was sued by the FTC, and their names do not even
`appear in the FTC’s Uncontroverted Statement of Facts and Conclusions of Law in Support of its
`Motion for Summary Judgement, the FTC’s response to Defendants® Statement of Facts, or the
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`Court’s Order Granting Plaintiff’s Motion for Summary Judgment, which adopted the facts relied
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`Case 2:21-cv-01273-WSS Document 1-2 Filed 09/23/21 Page 16 of 70
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`upon by the FTC. See Federal Trade Commission v. Cardiff, et al., 5:18-cv-02104 (C.D. Cal.2018)
`DE 423-3, 499-1 & 511.
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`48. This information was public and readily available to Defendants when they
`published the Report.
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`49. The Report also distorts Plaintiffs” businesses, trades, and professions, by falsely
`stating and implying that Plaintiffs are engaged in the same types of fraud committed by Redwood
`Scientific.
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`50. Plaintiffs have not engaged in fraud or illegal business practices.
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`Patently False Unlicensed Doctors Statements
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`51. The Report outright lies about LifeMD’s licensing practices, using Dr. Badii and
`Dr. Kalter as purported examples of LifeMD’s alleged widespread, and potentially criminal, use
`of unlicensed physicians to distribute controlled substances.
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`52. LifeMD’s physician network consists of nearly 90 board-certified and monitored
`medical providers who legally dispense prescription medications.
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`53. Further, LifeMD has never allowed an unlicensed medical provider to perform a
`telehealth consult for any of its brands.
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`54. The truth is that Dr. Badii was, and still is, a medical doctor licensed to treat patients
`and prescribe prescription medications in multiple states, which can be verified online through a
`simple web search.
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`35, LifeMD, through its own quality assurance processes, discovered in March 2021
`(i.e., pre-Report) that Dr. Badii had been sanctioned by the DEA for issues related to prescribing
`controlled substances, and was barred from prescribing controlled substances.
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`56. LifeMD immediately removed him from their physician network.
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`Case 2:21-cv-01273-WSS Document 1-2 Filed 09/23/21 Page 17 of 70
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`57. LifeMD has never prescribed controlled substances, an elementary fact that could
`also be verified by anyone that reviewed the company’s website and filings with the SEC.
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`58. All treatments and medications prescribed by Dr. Badii for LifeMD were lawful
`and in compliance with all federal and state laws related to prescribing prescription medicine.
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`59. In the case of Dr. Kalter, a web design error inadvertently listed Dr. Kalter as
`licensed in California rather than Massachusetts, where Dr, Kalter is licensed. As soon as LifeMD
`realized the error, it immediately fixed it.
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`60. Notably, Dr. Kalter never performed a consult or wrote a single prescription for
`LifeMD in California, even though he would be permitted to do so pursuant to an executive order
`signed by California’s Governor.
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`61. This information was also readily available to Defendants when they published the
`Report.
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`Patently False Insider Transactions Statements
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`62. The Report also misrepresents transactions and dealings between LifeMD and its
`executives, including Schreiber, as either hidden, illegal or unfair, with specific references, for
`example, to BV Global Fulfillment and JLS Ventures.
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`63. To the contrary, the rates LifeMD has paid, and still pays, to BV Global are in line
`with, if not lower than, what many third-party logistics providers charge for comparable services.
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`64. Inaddition, as is typical in contracting with a third party logistics provider, LifeMD
`pays the shipping costs in connection with delivery of its telehealth products to consumers.
`
`65. Notably, LifeMD’s relationship with BV Global is prominently disclosed in all of
`LifeMD’s filings, and this relationship has never been flagged or mentioned as an issue in any
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`audit or due diligence by institutions that have invested in LifeMD.
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`66. This information, too, was readily available to Defendants when they published the
`Report.
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`67. As for JLS Ventures, neither Schreiber nor JLS Ventures received any stock
`compensation for the credit card processing, as alleged in the Report, which fact was clearly stated
`in LifeMD’s 2019 Form 10-K. Rather, the referenced shares were incentive based, for Schreiber’s
`work as CEO.
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`68. In truth, transactions and dealings between LifeMD and its executives were
`disclosed as required