Ever wonder why your car insurance bill keeps climbing even though you haven’t had an accident in five years?
Zhan Petrosyants, a 44-year-old restaurateur from Edgewater, New Jersey, just handed federal prosecutors the answer on a silver platter. He’s been arrested for orchestrating what prosecutors describe as an “extensive” no-fault automobile insurance fraud scheme that bilked insurers out of tens of millions of dollars between 2018 and 2023. And if you live in New York and carry car insurance, you’ve probably already paid for some of his medical claims that were never actually delivered.
But this isn’t a story about one crooked businessman. It’s a story about a system so broken that sophisticated fraud became almost inevitable. And it exposes why Governor Kathy Hochul’s push for auto insurance reform has suddenly gotten a lot more urgent.
How Does a No-Fault Scheme Actually Work?
First, the mechanics. New York’s no-fault law requires every registered vehicle to carry insurance that covers up to $50,000 per person for accident injuries—no lawsuits required, no liability questions asked. Sounds good in theory. In practice, it’s a buffet.
“If insurance companies had known that the medical corporations were owned and controlled by non-medical professionals, or that the claims were inflated with testing or services that were not medically necessary, they would have denied payment for the claims.”
Here’s how Petrosyants allegedly worked it. He and his co-conspirators recruited licensed doctors and psychologists—or, more accurately, used their names and signatures without their knowledge. Then they submitted false medical claims for treatments that either never happened or weren’t medically necessary. The beauty of the scheme? Insurance companies had to pay first and ask questions later. That’s literally how no-fault works.
Once the claims got approved, Petrosyants used financing companies to access the money immediately. One such company—affiliated with an unnamed law firm—would advance him a chunk of the approved claim amount. He’d collect referral fees and kickbacks from co-conspirators. The money would get funneled through shell corporations and eventually land in a bank account disguised as a jewelry business in Manhattan’s Diamond District. Laundry complete.
It’s slick. It’s organized. And according to federal prosecutors, it generated tens of millions in fraud over five years.
Why This Matters More Than One Arrest
Here’s the part that should keep you up at night: Petrosyants isn’t a first-time offender. Back in 2014, he and his twin brother Robert pleaded guilty to running a check-cashing scheme tied to—wait for it—no-fault accident claims. Nine years later, he allegedly did it again, except bigger.
That means either the system learned nothing, he learned everything, or both.
Automatic payment systems create automatic fraud opportunities. When you don’t have to prove injury exists before paying, you create an incentive structure that invites the sophisticated fraudster. The no-fault system was designed with good intentions—get money to injured people fast, skip the lawsuit lottery. But it forgot one thing: humans will abuse anything that doesn’t require them to prove they actually delivered a product.
James Freedland, a spokesperson for Citizens for Affordable Rates, jumped on the arrest news with the obvious talking point: “No-fault insurance fraud is not a victimless crime—it is a widespread, organized problem that acts as a hidden tax on New Yorkers.” He’s right, technically. But calling it “hidden” is generous. Every New York driver sees it on their premium.
Who Actually Loses Here?
Insurance companies? They eat the losses for a while, then raise rates. Medical professionals with actual licenses? Their reputations get tangled up in schemes using their names. Accident victims who actually need treatment? They face higher premiums and insurance companies that have gotten significantly more stingy about approving legitimate claims.
And everyday drivers. They’re the real victims. When fraudsters drain tens of millions from the system, the insurance companies don’t absorb that cost. They pass it down. Your premiums climb because someone else filed a fake claim for spinal decompression therapy they never received.
U.S. Attorney Jay Clayton made that point in his statement: “No-fault insurance fraud schemes raise costs for everyone and reduce benefits to consumers, an unnecessary burden we all unfortunately share.” That’s bureaucrat-speak for: “You’re all paying for this.”
The Political Moment (And Whether It Actually Matters)
Timing is everything. Petrosyants’s arrest lands right in the middle of budget negotiations in Albany, where Hochul’s proposed auto insurance reforms have been a sticking point. The Governor wants to crack down on fraud partly through increased oversight of medical corporations, surprise surprise.
There’s an irony here worth noticing. Hochul’s pushing reform while Petrosyants—described by media as a close friend of former Mayor Eric Adams—gets arrested for doing exactly what the Governor says is a systemic problem. That gives the reform push credibility it might otherwise lack.
But credibility isn’t the same as action. The question isn’t whether lawmakers will acknowledge the problem. They will. The real question is whether they’ll actually restructure a system that makes fraud this easy to execute. That would require either mandatory fraud screening before payment (which slows down the entire system for legitimate claims) or a fundamental redesign of how no-fault works (which would upset insurance companies, medical providers, and claimant attorneys all at once).
So probably not.
The Uncomfortable Pattern
Petrosyants’s arrest is getting framed as a win for law enforcement. And it is. Prosecutors built a case over years. The FBI got involved. Federal court got a conviction (well, eventually—he’s pleaded not guilty). Serious resources went after one operator.
But consider the math. If one restaurateur managed to generate tens of millions in fraudulent claims over five years with a relatively simple playbook (hire names, submit false claims, funnel money through shell corporations), how many operators are probably doing something similar right now? How many are less sophisticated but still successful? How many got caught and never made headlines?
The system is so vulnerable that catching Petrosyants feels less like success and more like plugging one hole in a dam that’s actively flooding.
FAQs
What is no-fault auto insurance and how does it work?
No-fault insurance requires every registered vehicle in New York to carry coverage up to $50,000 per person for accident injuries, regardless of who caused the accident. It prioritizes fast payment for medical treatment without requiring lawsuits, but that speed creates fraud vulnerabilities.
What charges does Zhan Petrosyants face?
He’s charged with conspiracy to commit healthcare fraud, conspiracy to commit wire fraud, aggravated identity theft, and conspiracy to commit money laundering related to a scheme that allegedly generated tens of millions in fraudulent medical claims between 2018 and 2023.
Will Governor Hochul’s insurance reforms actually stop this kind of fraud?
Maybe partially, but probably not entirely. Effective prevention would require either mandatory fraud screening before payment (which slows legitimate claims) or a complete redesign of how no-fault works (which faces fierce industry opposition). Expect incremental changes, not transformation.
