💥New Chapter 11 Bankruptcy Filing - Zynex, Inc.💥
A literal shocking amount of fraud drives electrotherapy device designer into bankruptcy.
On December 15, 2025, Zynex, Inc. ($ZYXIQ) and six affiliates (collectively, the “debtors”) filed chapter 11 sale cases in the Southern District of Texas (Judge Perez). The debtors are a designer, producer, and marketer of electrotherapy devices.
But willingly yet therapeutically electrocuting their customers ain’t why the debtors found their way to Houston. It’s because there was … um … fraud going on. Heaps of that going ‘round these days. Here’s first-day declarant and CFO Vikram Bajaj describing the debtors’:
“Over the course of 2025, however, the Company has faced a number of challenges that have precipitated the filing of these Chapter 11 Cases. Specifically, Tricare [], a government sponsored insurance network, paused all payments and reimbursements to the Company as a result of an investigation into the Company’s historical billing practices. This loss of revenue has been significant for the Company, as 20-25% of the Company’s historical annual revenue has come from Tricare.”
Which, in ‘24, was $48.8mm for a take of, best case scenario, $244mm. Losing Tricare in 1Q’25 ain’t the only issue though; naturally, there are related lawsuits that are “… crushing the Company …” Back to Mr. Bajaj again:
“The Company is subject to numerous litigations and investigations that are pending in various courts and with various government agencies that may give rise to significant contingent unsecured claims against the Debtors. These include:
Investigations by the DOJ, HHS, DHA, California Department of Insurance and Colorado Attorney General: These potential claims relate to alleged fraudulent over-billing practices and consumer protection. The Debtors are currently in negotiations with the DOJ and various agencies to resolve these claims during the pendency of these Chapter 11 Cases.
Investigation by the SEC: On June 11, 2025, the Company received a voluntary (non-subpoena) request for documents from the SEC in connection with an investigation that the SEC is conducting to determine whether violations of federal securities laws have occurred. Since June, the Company has received two additional requests for documents. The Company is in discussions with the SEC to resolve any claims in conjunction with these Chapter 11 Cases.
Allstate Insurance Company, et. al. v. Sandgaard, Zynex, Inc., Zynex Medical, Inc., et. al.: On September 4, 2025, Allstate Insurance Company (‘Allstate’) and certain of its affiliates filed suit against the Company in the United States District Court for the Eastern District of New York. Allstate alleges violations of the Racketeer Influenced and Corrupt Organizations Act (‘RICO’), the Colorado Organized Crime Control Act, fraud, and unjust enrichment.
Tuncel v. Zynex, Inc. et. al.: On March 20, 2025, certain shareholders of the Company filed a securities class action suit in the United States District Court for the District of Colorado against the Company, [company founder board member Thomas] Sandgaard, and the Company’s former CFO, alleging that, in the wake of the Tricare revenue suspension, the Company made materially misleading statements that failed to disclose adverse facts related to the Company’s billing and supplying practices leading to scrutiny from insurers.”
The list goes on, and there’s even more related fallout (reduced sales, mass layoffs, negative EBITDA, earnings, cash flow for ‘25), but you get the picture: the debtors were and currently are 1,000% f*cked, as reflected by the stock price:
Maybe 1,1100% because May ‘26 is when $60mm in 5% senior convertible notes (the “convertible notes”) would mature too, and the debtors had no means to pay it back. In 2Q’25, they hired Steven Dyson as their turnaround-focused CEO. In August ‘25, Mr. Bajaj, CLO John Bibb, and EVP of Sales Ajay Gopal joined the party. It didn’t take them long to clue into how dire the situation was. In October ‘25, the debtors hired Province, LLC (“Province”) as financial advisor and investment banker, who reached out to 165 potential transaction counterparties, and a month later, in November, Messrs. Paul Aronzon and Bret Wise joined the board as special committee members.
While the prepetition transaction process was underway, the debtors kicked off negotiations with an ad hoc group of convertible noteholders (the “ad hoc group”),* represented by Brown Rudnick LLP … which, for abundantly clear reasons, wasn’t willing to lend additional capital into the biz absent bankruptcy court protections.
Heck, that a DIP was agreed to at all is kinda remarkable because in mid-December ‘25, the debtors came back around with their hand out, asking for even more money, and the ad hoc group only signed off on the upsizing after, realizing liquidation and firing the last ~400 employees was the only other option, Mr. Dyson stepped in to fund $2mm of the financing out of his own pocket. That apparently assuaged the concerns of the ad hoc group enough to get the debtors into bankruptcy with a restructuring support agreement (the “RSA”) in hand, which provides:
📍DIP. A $22.3mm ($10.5mm interim) delayed draw term loan facility, which was offered to all holders of convertible notes on pari passu terms – although “several” holders declined the invite – and backstopped by the ad hoc group. The DIP carries interest at 10% PIK and features a 3% PIK upfront fee, a 3% PIK exit fee, and a $5mm PIK backstop fee.
📍Stalking Horse Sale Process. A marketing and sale process to gauge third-party interest in the debtors’ assets, with the ad hoc group serving as a credit-bidding, “plan sponsor” stalking horse, on the following timeline:
📍Convertible Notes Claims and GUCs. To the extent the sale pays off the DIP, convertible notes will share, pro rata with GUCs, in any excess sale proceeds. But if the ad hoc group proposal goes forward, they’ll divvy up and receive their pro rata share of jack sh*t.
📍Milestones. Compared to most chapter 11 sale cases, a robust case timeline:
Three months from start to finish, after filing with ~$2.3mm in cash.
Thus far the cases have been humming along smooth as butter. The court held the first-day hearing on December 16, 2025, at which all requested relief was granted in about an hour. On December 30, 2025, folks reconvened for a quickie-11 minute hearing to reject a handful of leases, which, again, went off without a hitch. The second-day hearing is scheduled for January 13, 2026 at 10am CT, where we expect the same to continue while the debtors work on settlements of all the aforementioned litigation.
Props to the debtor and ad hoc group advisors, listed 👇, on an extremely clean, fuss-free, cost-avoiding process …
… and congrats, we guess, to the ad hoc group on its highly-likely take-private acquisition.
The debtors are represented by Simpson Thacher & Bartlett LLP (Elisha Graff, Moshe Fink, Rachael Foust, Zachary Weiner) and Reed Smith LLP (Omar Alaniz, Dylan Ross, Robert McLellarn) as legal counsel and Province (Daniel Moses) as financial advisor and investment banker. The debtors’ special committee is composed of Paul Aronzon and Bret Wise. The ad hoc group is represented by Brown Rudnick LLP (Robert Stark, Andrew Carty, Andreas Andromalos) and Porter Hedges LLP (John Higgins, Shane Johnson, Megan Young-John, James Keefe, Joanna Caytas). Wilmington Savings Fund Society, FSB, as administrative agent, is represented by Seward & Kissel LLP (John Ashmead, Catherine LoTempio). The official committee of unsecured creditors is represented by Vartabedian Hester & Haynes LLP (Jeff Prostok, Lynda Lankford, Mary Stanberry, Candice Carson).
*Members of the ad hoc group include (i) Whitebox Advisors LLC, (ii) Context Capital Management, LLC, (iii) Wolverine Asset Management, LLC, (iv) DeepCurrents Investment Group LLC, and (v) Verition Multi-Strategy Master Fund Ltd.
Company Professionals:
Legal: Simpson Thacher & Bartlett LLP (Elisha Graff, Moshe Fink, Rachael Foust, Zachary Weiner) and Reed Smith LLP (Omar Alaniz, Dylan Ross, Robert McLellarn)
Financial Advisor and Investment Banker: Province LLC (Daniel Moses)
Special Committee: Paul Aronzon and Bret Wise
Claims Agent: Epiq (Click here for free docket access)
Other Parties in Interest:
Ad Hoc Group:
Legal: Brown Rudnick LLP (Robert Stark, Andrew Carty, Andreas Andromalos) and Porter Hedges LLP (John Higgins, Shane Johnson, Megan Young-John, James Keefe, Joanna Caytas)
Administrative Agent: Wilmington Savings Fund Society, FSB
Legal: Seward & Kissel LLP (John Ashmead, Catherine LoTempio)
Official Committee of Unsecured Creditors
Legal: Vartabedian Hester & Haynes LLP (Jeff Prostok, Lynda Lankford, Mary Stanberry, Candice Carson)
Wild how fast this unwound once Tricare suspended payments. Losing 20-25% of revenue stream would cripple most businesses, but the SEC investigation plus RICO allegations from Allstate really shows this went way beyond normal billing disputes. The CEO self-funding$2mm of the DIP is either extreme confidence or desperation, probly bit of both.