Illinois Attorney General Lisa Madigan filed a consumer fraud lawsuit Friday against a Chicago business that buys and resells surplus diabetic testing strips and lancets online.
Surplus Diabetic Supplies LLC, which has a mailing address on the Northwest Side and does business online as CashNowOffer.com, is accused of enticing people to mail in their unused testing strips but failing pay them.
Its manager, Jonathan Avila, is also named in the lawsuit.
The state’s lawsuit says 185 consumers have complained to the attorney general’s office and hundreds more have complained to the Better Business Bureau.
Those complaints, however, “represent only a fraction of the approximately 7,000 consumers nationwide who are owed more than $1.3 million,” the suit says.
The suit alleges that CashNowOffer and Avila promised to pay consumers within 24 hours of receiving their testing supplies but either delayed sending payment or never sent any money at all. In some cases, consumers were paid but the checks bounced, Madigan’s suit contends.
Despite this, the company “turned around and sold the products they received and pocketed the profit,” the lawsuit alleges.
The state seeks to shutter the business and get restitution for consumers.
“[Avila] blatantly and brazenly deceived people through Cash Now Offer and my lawsuit will put an end to this ludicrous and harmful business in Illinois,” Madigan said in a statement.
Complaints from 46 states
The company’s website on Friday was down, replaced by a short statement saying the company is no longer operating and giving contact info for Avila. The Chicago Sun-Times left email and voice mail messages for Avila Friday.
CashNowOffer advertised through its website and social media. Customers were offered cash bonuses, referral bonuses and price-match guarantees, the lawsuit alleges.
Consumers in 46 states have lodged 469 complaints against CashNowOffer with the Better Business Bureau of Chicago and Northern Illinois, which has given the company its lowest rating — “F.” Californians have filed the most complaints, said Steve Bernas, president of the local BBB.
The bureau issued its second nationwide alert about the business in November.
In September, the Sun-Times reported that people were complaining about not getting paid for the supplies they mailed to the company.
Back then, Avila told the Sun-Times he was “working to get those complaints resolved.”
The BBB has said it communicated with the business several times over the past year. Each time, promises were made to fix the problems, which company officials blamed on previous ownership.
‘Gray market’ is legal
Reselling diabetic testing strips is legal, according to the U.S. Food and Drug Administration, unless they are obtained fraudulently from Medicare or Medicaid with the intent to sell them.
Thirty million diabetics in the United States use about $4 billion in testing strips each year. The strips are used to monitor blood sugar, often several times a day.
A booming “gray market” in resellers has cropped up, with businesses advertising online, on social media and elsewhere. For example, a reseller might pay $15 to a patient willing to sell a box of 50 strips –– a box that would cost $99 out-of-pocket at a pharmacy. The reseller then turns around and sells the box for $35 on the resale market.
Some people who sell strips say they have extra boxes because their testing regime or insurance coverage changed.
But the FDA and the American Diabetes Association caution against buying resold testing strips on the gray market. They say the strips could be stored at improper temperatures, tampered with or replaced with counterfeits –– all of which could produce dangerously incorrect results.