Over the past year, the media have sensationalized a Texas civil lawsuit by Solidaris Capital LLC, alleging fraud and investor deception. However, these claims are unproven: the Dallas County suit (filed Dec. 2024) remains in discovery, and no court has issued findings or rulings of fraud.
Media reports sometimes present unresolved legal complaints as if they are proof of wrongdoing, even though courts have not yet reviewed the evidence or made decisions. The ongoing media 'trial' has also accused Head Genetics of misrepresentation, but these are only claims, not court findings. Reporting allegations as facts can mislead readers.
The Regulatory Angle: FDA and NovaDerm
Some articles criticize Head Genetics for not having FDA approval for its concussion saliva test. While it is true that this technology does not yet have FDA approval, early-stage technologies often operate under research or investigational status without formal approval. Not having FDA clearance by itself does not mean there is fraud.
In contrast, Solidaris's NovaDerm is a skin-based product that faces strict FDA rules. Industry reports said NovaDerm is classified as a biologic by the FDA, which means it needs full clinical trials. Even with an "Orphan Drug" status, regulators said NovaDerm still required "adequate and well-controlled studies" before approval.
When Solidaris promoted NovaDerm, it did not have market clearance, published trials, or peer-reviewed validation. If not having FDA approval is seen as fraud, NovaDerm would also meet that standard. However, critics did not examine NovaDerm as closely, showing a selective narrative. Regulators have not called NovaDerm or the concussion test illegal without approval. The main question is whether promoters are honest about their products and how they use funds.
Solidaris's Claims vs. Reality
Solidaris markets itself as a socially responsible investment platform promising large deductions, but public records and whistleblower reports reveal significant operational discrepancies.
For example, investors were offered deals that promised unusually high charitable deduction ratios, sometimes several times the amount invested. The money was moved through several layers of entities, and most of the funds went to licensing fees, marketing costs, and administrative charges.
Available disclosures and public filings indicate that, in many instances, close to seventy-five percent of investor capital was allocated to expenses, with a substantial portion ultimately paid to Solidaris or to entities controlled by founder Geoff Dietrich and his associates. Only a limited share of proceeds was applied toward producing or securing the assets later represented as charitable contributions.
Even more concerning, public Form 990 filings show that several charities involved did not confirm receiving the donated assets, even though investors claimed large tax deductions for them. The difference between what promoters said, what investors reported, and what charities disclosed is missing from media stories that focus on criticizing competitors.
Instead of looking into these issues, the articles blame competitors and avoid examining Solidaris's own problems.
Charitable Deduction Schemes: How They Work (and Where to Watch for Abuse)
To see the bigger picture, it is useful to know how these tax-advantaged deals usually work. Promoters often set up a new LLC or partnership, move assets like cash or stock into it, and then donate a share of the entity to charity. Often, the donor still keeps control or use of the assets.
The IRS warns that abusive "charitable LLC" schemes encourage giving non-voting, non-managing membership units to a charity while the donor keeps control of the voting units and can even reclaim the assets later. In practice, this lets donors claim large deductions (often based on inflated appraisals) without truly relinquishing the asset's value.
For example, a Department of Justice case described a scheme where a physician "donated" a company valued at $764,350 to a charity that the promoter controlled, yet he "retained complete control and use" of the asset and later bought it back for $10,000. That scheme (the "Ultimate Tax Plan") ended in fraud charges.
Investors should watch for these common features and warning signs:
- Unrealistic "tax-free wealth" pitches: Be very skeptical of any deal marketed as a way to multiply wealth while getting huge deductions. Tax experts note that schemers often promise "tax-free" growth and provide inflated appraisals to justify massive write-offs. If an adviser claims you can make money off a charitable donation, that should trigger caution; legitimate contributions do not create personal profit beyond the tax benefit.
- Overly complex LLC structures: The IRS specifically warns against transactions that require forming multiple entities solely for a donation. If a deal mandates the creation of a new LLC or series of entities (with no real business purpose) just to donate an interest, that's a warning sign.
- Retention of control or buyback promises: A valid charitable gift requires the donor to give up control of the asset. Be very wary if the promoter allows you to use the asset after the donation (for example, by loaning the cash back to you) or promises you can buy it back later at a low price. Such features disqualify a real donation under IRS rules and are classic red flags.
- Check the charity: Verify that the nonprofit involved is a legitimate 501(c)(3) organization with a solid record. Ask for the charity's written acknowledgment of your gift (required for any deduction over $250) and review its IRS Form 990 filings to see if it actually reports receiving and using the donated assets.
- Independent valuation: Insist on a credible, independent appraisal for any non-cash gift. If a promoter supplies the valuation, it may be grossly inflated. The IRS warns that abusive schemes frequently involve "fake appraisals" to boost the claimed deduction.
In summary, investors should ask for transparency at every stage. Everyone should get independent tax and legal advice, make sure all documents are in order, and avoid promises of unrealistic benefits. Many advisors warn that any charitable-deduction deal offering more than a tax break is a red flag.
Investor Takeaways: How to Vet Tax-Advantaged Deals
Whether you are a retail or institutional investor, the main lesson is to always do careful research on any investment linked to a charitable deduction. Here are some specific safeguards:
- Check official records. Look up FDA databases and ClinicalTrials.gov yourself to verify product claims. Do not just take a promoter's word about regulatory status. Experts say, "no FDA approval after 10 years of claimed development should be an automatic deal-breaker." Also, check company formation dates and leadership backgrounds using state records.
- Keep records of everything. Get written acknowledgments from charities for any donation over $250, and keep all contracts, appraisals, and correspondence. Make sure the charity is able and willing to accept the gift. If another entity manages the donation, check its fees carefully.
- Get independent advice. Hire qualified tax and legal professionals who do not earn commissions. Ask them to check if the transaction follows IRS rules. For a valid deduction, you must give up control of the donated asset to the charity. If there is any way for you to access or buy back the asset, a tax attorney will say it is not a real donation.
- Be cautious of hype. Warning signs include promoters offering personal benefits beyond the deduction, such as buy-backs or dividends, making big claims about technology without proof, or pressuring you to act fast. One expert advises always checking major claims like FDA approval, patent status, or past "exits" on your own.
Tax-advantaged strategies can be legal, but they are strictly regulated. The IRS warns investors to be careful with any plan that seems too good to be true. The best way to check claims is to look for solid evidence, such as audited financials, official filings, qualified appraisals, and clear charity acknowledgments.
Conclusion
The ongoing media sensationalism highlights alleged fraud, but no court has confirmed these claims. Clear reporting must distinguish between unproven lawsuits and fact. Investors should conduct independent due diligence and heed regulatory guidance before engaging in any tax-driven deal.
The main lesson is that money, tax law, and innovation do not work well together without transparency. In this situation, you need to look beyond headlines and examine how the deals actually work. Only by relying on evidence, not repeated press releases, can you tell the truth from spin.
