(HedgeCo.Net) The Securities and Exchange Commission has charged now-defunct digital pharmacy startup Medly Health Inc’s. co-founder and former CEO, Marg Patel, former CFO, Robert Horowitz, and former Head of Rx Operations, Chintankumar Bhatt, with defrauding investors in connection with capital raising efforts that netted the company over $170 million.

According to the SEC’s complaint, from at least February 2021 through August 2022, Patel and Horowitz provided financial information to existing and prospective investors that fraudulently overstated Medly’s revenue due in part to millions of dollars’ worth of fake prescriptions entered into the company’s systems by Bhatt. The SEC’s complaint alleges, among other things, that Patel and Horowitz knew of, but failed to correct, significant accounting irregularities and were aware of several reports and complaints by employees that the revenue reported in Medly’s financial statements to investors was inaccurate.

“The alleged facts of this case demonstrate significant corporate malfeasance,” said Sheldon L. Pollock, Associate Director of Enforcement in the New York Regional Office. “We allege the defendants harmed investors by misleading them about the company’s revenues, with one defendant going as far as making up fake prescription orders to increase revenue numbers. Startups that seek to raise capital from investors through deceitful conduct remain a continued focus for the Commission.”

The SEC’s complaint, filed in the U.S. District Court for the Eastern District of New York, charges Patel, Horowitz, and Bhatt with violating the antifraud provisions of the securities laws and charges Bhatt with aiding and abetting Patel’s and Horowitz’s primary securities law violations. The complaint seeks permanent injunctions, civil money penalties, disgorgement, prejudgment interest, and officer-and-director bars against all three defendants.