Dr. Potarazu pleaded guilty to shareholder and employment fraud in December 2016. He admitted providing false and misleading information to VitalSpring’s shareholders to get them to make more than $49 million in capital investments in the company. For example, he told investors in 2014 that VitalSpring’s 2013 revenues were about $12.9 million when the company’s actual revenues for that year were less than $1 million. He also admitted concealing from shareholders that he failed to pay more than $7.5 million in employment taxes.
In May, VitalSpring, which provided data analysis and services related to healthcare expenditures, and its subsidiary Enziime filed for Chapter 7 bankruptcy.
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