Plaintiff Mitzi Pasch sued telehealth app company OnDoc Tuesday for securities fraud after investing over $100,000 in “stock” in the purported “pyramid marketing operation.” OnDoc’s allegedly false and untrue securities statements led to the complaint in the Eastern District of Missouri. OnDoc is an online platform allegedly allowing users access to discount prescriptions and to consult medical professionals for a monthly fee.
The plaintiff explained that OnDoc “is structured as a typical multi-level or pyramid marketing operation, under which distributors are encouraged to recruit new distributors and are compensated based on their own production, the production of new distributors, and so on.” Pasch was presented with the “opportunity” to purchase common stock in the company. Pasch states that in 2018, she was solicited to invest in OnDoc “through a series of false and fraudulent statements.” For example, OnDoc founder Robert Wilson, claimed that a Carolina Panthers quarterback “donated $500,000 toward the purchase of OnDoc vouchers for poor and underprivileged families through OnDoc’s charitable arm, OnDoc Cares.” If true, this would have “provided significant public gravitas and operating capital for OnDoc.” However, the complaint said this statement is false. Other misrepresentations and false statements include that Stream’s CEO endorsed OnDoc, and that Ernst & Young evaluated the company’s going concern value at $20.4 million and predicted it would have 125,000 customers by the end of the 2019 fiscal year. Wilson also misrepresented the number of clients and falsely promised the plaintiff’s son would receive a finder’s fee.
When Pasch was preparing to invest, Wilson represented that she could purchase “‘up to 50,000 Shares of Common Stock at $2.00 per share’ even though Wilson knew that OnDoc was a limited liability company whose ownership was represented by membership interests, not shares of common stock.” Thus, there was no stock for her to “invest” in. Wilson also falsely represented that OnDoc “was initially capitalized by…a $100,000 capital investment by Wilson,” and that “an individual named Leslie Siegel owned 50,000 shares of OnDoc common stock when no person owned any ‘stock’ in OnDoc.” Meanwhile no one owned OnDoc “stock” and there was never a board of directors for OnDoc, unlike Wilson’s representations.
The plaintiff claimed that she relied on Wilson’s false statements when deciding to invest. According to the Unit Purchase agreement Pasch “would purchase her OnDoc shareholding interest by paying $100,000 in cash and $100,400 in the form of a non-interest loan.” In November 2018, she “wired $80,000 to an account titled ‘RW Direct’ toward her purchase of what she thought was OnDoc common stock.” A month later she wired an additional $20,000 to that same account. In January, Wilson pressed her for the rest of the money, explaining how it was necessary and breaking down how would be spent. Pasch sent the remainder of her “investment,” believing that it was in good hands and would be used in a professional manner.
As a result of this alleged conduct, the plaintiff stated that Wilson and OnDoc have violated Missouri securities law and the Federal Securities Exchange Act of 1934 because defendants represented materially false and untrue statements or omitted information to the plaintiff that misled the plaintiff and allegedly induced her to purchase securities. These misstatements have caused the plaintiff to suffer damages. Pasch also accuses the defendants of violating common law fraud and for negligent misrepresentation.
Pasch has sought $150,400 plus pre- and post-judgment interest; her attorneys’ fees and costs; an award for punitive damages; and other relief as determined by the court.
Pasch is represented by Stone, Leyton & Gershman.