Federal authorities have arrested Zhan Petrosyants, accusing him of running a massive no-fault auto insurance fraud ring that funneled tens of millions of dollars through fake medical claims and money laundering.
Petrosyants, 44, nicknamed 'Johnny,' from Edgewater, New Jersey, faces multiple charges, including conspiracy to commit healthcare fraud, wire fraud, aggravated identity theft, and money laundering.
The alleged scheme ran from 2018 to 2023, racking up tens of millions of dollars in fraudulent no-fault medical claims billed to insurance companies.
The arrest of Petrosyants—described by media as a restaurateur and a close friend of former New York City Mayor Eric Adams—comes amid Albany lawmakers’ tense budget negotiations, where proposed auto insurance reforms by Gov. Kathy Hochul, aimed partly at cracking down on no-fault insurance fraud, have become a major sticking point.
Petrosyants’ lawyer told The New York Times that he has pleaded not guilty and plans to "vigorously" fight the charges.
This isn’t Petrosyants’ first run-in with auto insurance-related crimes. Back in 2014, he and his twin brother, Robert, pleaded guilty to a check-cashing scheme that bypassed anti-money-laundering rules, which also involved no-fault accident claims.
New Charges Unveiled
In an indictment filed yesterday in Manhattan federal court, prosecutors allege that Petrosyants and his co-conspirators submitted insurance claims for services that were never performed, were unnecessary or excessive, and were billed under medical corporations that were not actually owned, operated, or controlled by licensed medical professionals, as state law requires.
Prosecutors say Petrosyants carried out the scheme by recruiting purported physicians, psychologists, and other clinicians, submitting fraudulent no-fault insurance claims under their names. The conspirators reportedly also misused the licenses and signatures of licensed psychologists and medical professionals.
Prosecutors stated that if insurance companies had known the medical corporations were run by non-medical professionals—or that the claims were padded with unnecessary tests or services—they would have denied payment.
According to the indictment, after submitting the claims, Petrosyants allegedly used them to secure a portion of the payouts through financing agreements with funding companies. One such company, tied to an unnamed law firm, provided quick cash advances and "provided a veneer of legitimacy to the scheme," the indictment says.
According to the indictment, Petrosyants received referral fees from the funding company as well as kickbacks from his co-conspirators. Prosecutors also say the company advanced millions on no-fault medical claims to two shell corporations, with the funds eventually funneled into a bank account nominally tied to a jewelry business in Manhattan’s Diamond District.
No-Fault Insurance Rules
In New York State, every registered vehicle must carry no-fault auto insurance, which allows drivers and passengers to receive up to $50,000 per person for injuries from an accident, regardless of who’s at fault. The law ensures prompt payment for medical treatment, eliminating the need for claimants to file personal injury lawsuits to get reimbursed. It also lets patients assign their insurance reimbursement rights to others, including medical clinics that treat their injuries.
“As alleged in the indictment, Zhan Petrosyants orchestrated a complex scheme to cheat insurance providers out of millions of dollars,” said U.S. Attorney Jay Clayton. “No-fault insurance fraud schemes raise costs for everyone and reduce benefits to consumers, an unnecessary burden we all unfortunately share. Today’s arrest demonstrates this Office’s continuing commitment to rooting out this pernicious type of fraud that imposes costs on all New Yorkers.”
The Federal Bureau of Investigation (FBI) teamed up with Clayton’s office to bring the indictment.
Supporters of Hochul’s auto insurance reforms jumped on the news to push their agenda.
“Anyone who says auto insurance fraud isn’t a serious problem is willfully ignoring the facts. This case makes clear that no-fault insurance fraud is not a victimless crime – it is a widespread, organized problem that acts as a hidden tax on New Yorkers and drives up costs for every honest driver,” said James Freedland, a spokesperson for Citizens for Affordable Rates (CAR). “It’s time the legislature takes on auto insurance fraud head-on by passing the Governor’s reforms in the state budget.”
Hochul’s proposals aim to tackle staged accidents by holding criminals—not just drivers—liable for fraud; curb "jackpot" lawsuits by tightening the no-fault definition of serious injury; limit non-economic damages for drivers found mostly at fault under comparative fault rules; require insurers to offer discounts for safe-driving apps and devices; and prevent excessive profits by mandating that insurers return earnings above a set threshold to policyholders.
The New York State Trial Lawyers Association (NYSTLA) stands as the main roadblock in the legislature to Hochul’s auto insurance reforms. NYSTLA argues that the proposed changes would boost insurers’ profits while limiting consumers’ rights to sue and the damages they could receive.
