The lawsuit alleges that GeneDx executives promoted the acquisition of Fabric Genomics as an AI-driven catalyst for growth and efficiency, while failing to disclose internal integration failures. According to the complaint, management purportedly touted the deal as a means to lower costs and boost software-based revenue, despite allegedly knowing that the unit faced significant operational disconnects.

These claims faced a reality check on May 4, 2026, when the company revealed a $31.2 million impairment loss on the Fabric unit—effectively erasing 94% of the acquisition's value. Alongside this charge, GeneDx reported missed revenue targets and slashed its 2026 guidance from $550 million to $490 million. The market reaction was immediate, with shares of WGS plunging 49.2% in a single session, falling from $67.93 to $34.51. Reed Kathrein, the partner at Hagens Berman leading the investigation, stated that the firm is scrutinizing the full extent of the alleged misrepresentations regarding the company's AI-driven efficiencies.