Fraud

State of play.

• California AG Bonta has escalated the PFAS fraudulent-transfer theory to cover successive corporate spinoffs, filing a Second Amended Complaint that names Qnity Electronics for the first time and targets an amended MOU as an additional mechanism to shift insurance coverage away from Chemours — a theory that, if sustained, would consolidate liability across the entire DuPont corporate family .
• The FTC, joined by Utah and California, has sued Hims & Hers for sharing sensitive health data with Meta and Snap and charging customers before any provider consultation occurred — a dual-theory complaint combining health-data privacy violations with ROSCA subscription-billing fraud .
• AI-generated synthetic personas are producing live consumer fraud exposure on TikTok Shop, with undisclosed AI avatars selling dropshipped goods and TikTok's own enforcement mechanisms still opaque — creating false advertising and FTC enforcement risk for brands operating on the platform .
• State AG enforcement through existing fraud statutes continues to expand: Florida, West Virginia, and Louisiana have issued coordinated investigative subpoenas to Dr. Anthony Fauci on a self-dealing theory, demonstrating that a federal pardon does not foreclose state-law fraud investigations .
• For counsel advising healthcare systems, DTC consumer brands, or companies undergoing corporate restructuring, the practical baseline is that fraud theories are reaching further — into AI tool validation, health-data sharing, successive spinoff transactions, and pandemic-era public health decisions — with state AGs as the most active enforcement vector.

Where things stand.

• FCA enforcement is at record levels and expanding in scope. DOJ FY2025 recoveries of $6.8 billion — the highest ever — are anchored in healthcare but now explicitly extend to DEI employment practices through the Civil Rights Fraud Initiative, with the IBM $17 million settlement as the template for qui tam plaintiffs .
• The FOCUS initiative formalizes data-miner qui tam partnerships. Data miners filed a record 1,297 FCA cases in FY2025 and accounted for over 45 percent of complaints since FY2024; FOCUS creates a pre-filing consultation channel that DOJ will use to triage quality and potentially strengthen enforcement posture against weaker algorithmic suits .
• Healthcare fraud enforcement has a new geographic and structural footprint. The West Coast Strike Force adds Northern California, Arizona, and Nevada to an existing nine-district model; CMS is running predictive audits on hospice providers and has imposed an accelerated Medicaid provider revalidation mandate on all states; and the Eleventh Circuit has expanded criminal exposure for false ownership disclosures on CMS-855 enrollment forms .
• Subscription-fraud enforcement is targeting international corporate structures. The FTC's Genesis Tech action demonstrates that asset freezes and individual liability will follow offshore-structured networks exploiting app-store enforcement gaps; ROSCA is the primary statutory vehicle, and the Hims & Hers complaint extends the same ROSCA theory into telehealth .
• Prediction markets are now a regulated enforcement zone. The CFTC's first insider-trading action on event contracts, combined with the DOJ's commodities-fraud prosecution of the Google engineer charged over Polymarket bets using confidential search data, establishes that existing commodities and securities fraud frameworks apply to these platforms .
• PFAS fraudulent-transfer litigation is expanding its corporate perimeter. California's Second Amended Complaint against the DuPont family of companies — now including Qnity Electronics — invokes the Uniform Fraudulent Transfer Act and Uniform Voidable Transactions Act to challenge successive restructurings; the South Carolina federal court's treatment will influence parallel litigation in other jurisdictions .
• AI-enabled fraud is a systemic enforcement and compliance risk. North Korean laptop farms have infiltrated more than 300 US companies using stolen identities and generative AI, generating over $5 million for the DPRK regime; DOJ has obtained sentencing convictions, but the scheme has expanded into European markets . Separately, the UN International AI Safety Report 2026 — drawing on World Economic Forum data ranking adverse AI outcomes as the fifth most critical global risk — documents that AI capabilities are advancing faster than governance frameworks .
• AI whistleblower and False Claims Act exposure is emerging in healthcare. The Mayo Clinic AI whistleblower suit alleges suppression of a 67% error rate in the MAYA digital assistant and deletion of unflattering test results — filed under the FCA's retaliation provision — signaling that AI validation failures in clinical settings are becoming a False Claims Act exposure vector .
• Whistleblower infrastructure is expanding on multiple fronts. The GAO has validated whistleblower program efficiency; FinCEN has proposed awards of 10-30% for AML and sanctions violations; and the SEC's narrow "voluntary" disclosure standard — denying an award to the Deutsche Bank ESG whistleblower who published in the WSJ before filing — remains a contested interpretive question .
• The Second Circuit has narrowed insurers' ability to deny no-fault claims based on provider kickbacks. The panel certified to the New York Court of Appeals whether anti-kickback violations automatically disqualify providers from no-fault reimbursement eligibility; hundreds of similar cases are in limbo pending the state court's answer .
• In-house counsel fraud and fiduciary-duty litigation is active on two fronts. The Flextronics IP theft suit against a former deputy GC survived dismissal, keeping alive fraud, breach of fiduciary duty, and trade secret claims arising from undisclosed patent assignments to a startup the attorney secretly co-founded . The American Healthcare Systems amended complaint charges former in-house counsel with orchestrating an extortion and takeover scheme across a five-hospital network .

Latest developments.

• California AG files Second Amended Complaint in PFAS litigation, adding Qnity Electronics as a new defendant and targeting an amended MOU as a further fraudulent-transfer mechanism under the Uniform Fraudulent Transfer Act and Uniform Voidable Transactions Act .
• FTC, Utah, and California sue Hims & Hers for sharing health data with Meta and Snap and charging customers before provider consultations, alleging FTC Act, ROSCA, and state consumer protection violations .
• AI-generated synthetic personas flooding TikTok Shop with undisclosed product promotions; TikTok has begun enforcing a synthetic media disclosure policy but enforcement mechanisms remain unclear .
• Florida, West Virginia, and Louisiana AGs issue coordinated subpoenas to Dr. Anthony Fauci on a self-dealing theory; Louisiana AG states newly discovered records contradict prior sworn testimony; federal pardon does not foreclose state-law exposure .
• Former Mayo Clinic AI research director sues under FCA retaliation provision, alleging suppression of a 67% error rate in the MAYA digital assistant and deletion of adverse test results .
• DOJ obtains sentencing convictions in North Korean laptop-farm scheme — over 300 US companies infiltrated using stolen identities and generative AI, generating more than $5 million for the DPRK regime .
• Visa agrees to acquire BioCatch for $2.4 billion, signaling a strategic pivot toward behavioral biometrics as a core fraud-prevention layer for financial institutions .
• Flextronics IP theft suit against former deputy GC survives dismissal — fraud, fiduciary duty, and trade secret claims proceed in N.D. Cal. .
• American Healthcare Systems files amended complaint charging former in-house counsel with extortion and takeover scheme across five Florida hospitals .
• UN International AI Safety Report 2026 released, finding AI capabilities in critical fields are advancing faster than governance frameworks and ranking adverse AI outcomes as the fifth most critical global risk per World Economic Forum data .

Active questions and open splits.

• Successive-spinoff fraudulent transfer — how far does liability consolidation reach. California's theory in the DuPont PFAS litigation is that each subsequent restructuring — the Chemours spinoff, the MOU, its amendment, and now Qnity Electronics — is independently voidable; no court has yet tested whether a series of post-spinoff agreements can be unwound cumulatively, and the South Carolina federal court's ruling will set the template for environmental and mass-tort restructuring cases nationwide .
• Health-data sharing with ad platforms as a standalone fraud theory. The Hims & Hers complaint charges that sharing health data with Meta and Snap despite privacy commitments constitutes deceptive practice under the FTC Act — not just a HIPAA or state privacy violation; whether courts sustain this framing would extend FTC fraud jurisdiction into any consumer-facing health platform with ad-tech integrations .
• AI synthetic persona disclosure — what standard governs marketplace fraud. TikTok's own synthetic media policy requires disclosure labels, but the FTC has not yet issued binding rules on AI-generated commercial personas; whether undisclosed AI avatars constitute per se false advertising or require proof of consumer deception remains unsettled, and the answer will define compliance obligations for every brand using AI-generated content in commerce .
• FCA retaliation as a vehicle for AI validation failures in healthcare. The Mayo Clinic suit tests whether suppressing adverse AI performance data — specifically, deleting test results showing a 67% error rate — constitutes a false statement to a federal program sufficient to trigger FCA retaliation protection; a ruling sustaining the theory would create a new whistleblower pathway for AI safety concerns at any federally funded health system .
• State AG self-dealing investigations after a federal pardon. The Fauci subpoenas establish that state AGs are treating federal pardons as no bar to state-law self-dealing investigations; the open question is whether any state statute reaches the specific conduct alleged — public health recommendations that generated personal financial benefit — and whether the Fifth Amendment invocations in Senate testimony are admissible in state proceedings .
• In-house counsel fiduciary duty — scope of the undisclosed-conflict theory. The Flextronics case keeps alive a claim that a deputy GC who secretly co-founded a startup and arranged favorable patent assignments to it committed fraud, not just a professional responsibility violation; courts sustaining this framing would expand civil fraud exposure for in-house attorneys beyond traditional breach-of-fiduciary-duty recovery .
• No-fault reimbursement eligibility after kickback violations. The Second Circuit's certification to the New York Court of Appeals leaves hundreds of similar cases in limbo; insurers cannot rely on categorical disqualification while providers facing kickback allegations have strengthened reimbursement defenses pending the state court's answer .

What to watch.

• South Carolina federal court's treatment of California's successive-spinoff fraudulent-transfer theory in the DuPont PFAS litigation — the first ruling on whether a series of post-spinoff agreements can be cumulatively unwound will reshape restructuring risk assessments in environmental and mass-tort contexts.
• Hims & Hers litigation — early motions practice on whether health-data sharing with ad platforms satisfies the FTC Act's deception standard independent of HIPAA, and whether the court sustains the pre-consultation billing theory under ROSCA.
• FTC rulemaking or enforcement guidance on AI-generated commercial personas following the TikTok Shop synthetic media disclosure issue — any formal FTC action would immediately reset compliance obligations for brands using AI content in commerce.
• Mayo Clinic discovery — what documentation of AI validation practices and adverse-result deletion surfaces, and whether DOJ intervenes in the FCA retaliation claim.
• New York Court of Appeals answer to the Second Circuit's certified question on no-fault reimbursement eligibility — the ruling will reset leverage in hundreds of pending no-fault fraud cases.
• Whether the Florida, West Virginia, and Louisiana Fauci investigations produce formal charges or civil complaints, which would test the outer boundary of state self-dealing statutes applied to federal public health officials.