The defendants include Terrence Williams, Alan Anderson, Anthony Allen, Shannon Brown, William Bynum, Ronald Glen "Big Baby" Davis, Christopher Douglas-Roberts, Melvin Ely, Jamario Moon, Darius Miles, Milton Palacio, Ruben Patterson, Eddie Robinson, Gregory Smith, Sebastian Telfair, Charles Watson Jr., Antoine Wright and Anthony Wroten.
Allen's wife, Desiree Allen, was also named as a defendant.
They each face counts of conspiracy to commit health care and wire fraud. By midday Thursday, 16 of the 18 former players had been taken into custody, officials said.
"The defendants' playbook involved fraud and deception," Audrey Strauss, the U.S. attorney for the Southern District of New York, told reporters. "They will have to answer for their flagrant violations of law."
Strauss said Williams, 34, a Seattle native who spent four seasons in the NBA, was the "scheme's linchpin," submitting false claims to the league's health care plan.
Download the NBC News app for breaking news
He was accused of supplying false invoices to support the fraudulent claims in exchange for kickback payments that totaled at least $230,000, authorities said.
Prosecutors alleged that when one player didn't pay Williams, he called the co-defendant pretending to be a plan administrator and said there was a problem with the claim.
Strauss said the hope was to "frighten the player into re-engaging with Williams," who was also hit with an aggravated identity theft charge in connection with the call.
In total, the defendants submitted $3.9 million in fake claims, and $2.5 million was paid out, officials alleged.
The scheme was uncovered, in part, because of the sloppy work of the defendants, authorities said.
For example, Smith, who played for the Houston Rockets, submitted claims for IV sedation, a root canal and crowns that he is alleged to have received during a Dec. 20, 2018, dental procedure in Beverly Hills, California, prosecutors said.
"Travel records, e-mail and publicly available box scores showed that he was playing professional basketball in Taiwan that week and did not receive root canals in Beverly Hills as represented in the claim form he submitted," Strauss said.
At the time, Smith was in Taiwan's Super Basketball League, and he scored 11 points for Bank of Taiwan the next day in an 84-76 loss to Kaohsiung Jeoutai Technology.
And several players didn't bother comparing notes to see whether they were raising red flags by putting in for the exact same dental procedures on the same days, Strauss said.
For example, Davis, Allen and Wroten filed for root canals, all supposedly performed on the same six teeth on April 30, 2016, Strauss said. The trio also put in for payments for crowns done on the same six teeth on May 11, 2016, she said.
Wroten and Allen filed for root canals done on the same 13 teeth on Sept. 6, 2018, Strauss said.
Several of the fake invoices and medical necessity forms stood out because "they are not on letterhead, they contain unusual formatting, they have grammatical errors," according to the indictment.
Michael Driscoll, assistant director in charge of the FBI's New York field office, said such cases have damaging trickle-down impacts on consumers.
"This [health care] industry loses tens of millions of dollars a year to fraud," he said. "These costs are then passed down to business and customers. That's a fraud we take very seriously."
Davis is among the best-known of the defendants.
Telfair, the cousin of longtime NBA player Stephon Marbury, a basketball icon in China, was famous before he even set foot on the pro hardwood. He was one of his era's best-known high school players, and the Portland Trail Blazers took him with the 13th overall pick of the 2004 NBA Draft.
It wasn't immediately clear by midday Thursday whether any of the players had hired defense attorneys.
Relatives of Davis and Allen did not immediately return messages seeking their comment.
The NBA said it is cooperating.
"The benefit plans provided by the NBA and the National Basketball Players Association to our players are critically important to support their health and well-being throughout their playing careers and over the course of their lives, which makes these allegations particularly disheartening," the league said in a statement.
Last month, former NFL players Clinton Portis, Tamarick Vanover and Robert McCune pleaded guilty for their roles in a nationwide health care fraud scheme and could face years in prison, the Justice Department said.
Portis, Vanover and McCune admitted to defrauding an NFL program set up to reimburse medical expenses not covered by insurance for retired players and their families, the Justice Department said.