Former CEO of CytoDyn and Head of Contract Research Organization Face Decades in Prison for Securities Fraud, Wire Fraud, and Insider Trading
In a resounding victory for investor protection, a federal jury in Maryland convicted two high-ranking biotechnology executives for their roles in a complex scheme to defraud investors in CytoDyn Inc. Nader Pourhassan, the former CEO of CytoDyn, and Kazem Kazempour, the former CEO of Amarex Clinical Research LLC, were found guilty of manipulating the company’s stock price by making false and misleading statements about the development of leronlimab, an investigational drug touted as a potential treatment for HIV and COVID-19.
Exploiting Public Health Crises for Personal Gain
Between 2018 and 2021, Pourhassan and Kazempour orchestrated a campaign of deception, capitalizing on the anxieties surrounding the HIV/AIDS epidemic and the global COVID-19 pandemic. They preyed on investor hopes by falsely claiming that leronlimab was on the verge of FDA approval for HIV treatment, when in reality, the application was incomplete and destined for rejection. They further fueled investor excitement by exaggerating the drug’s potential as a COVID-19 treatment, despite knowing that clinical trials had failed to demonstrate its efficacy.
Web of Deceit: False Statements, Hidden Data, and Insider Trading
Pourhassan and Kazempour employed a multi-faceted strategy to deceive investors:
- Falsely announcing FDA submission for HIV treatment: In a blatant misrepresentation, they publicly declared that leronlimab had been submitted for FDA approval to treat HIV, triggering a surge in CytoDyn’s stock price. This allowed Pourhassan to immediately sell over 4.8 million shares of his personal stock at inflated prices, reaping enormous profits.
- Misrepresenting COVID-19 trial results: They painted a rosy picture of leronlimab’s potential as a COVID-19 treatment, concealing the fact that clinical trials had failed and the FDA had expressed serious concerns about the validity of the submitted data.
- Insider Trading: Pourhassan leveraged his insider knowledge of the drug’s actual status to engage in insider trading, further enriching himself at the expense of unsuspecting investors.
Consequences of Deception: Millions Lost, Public Trust Eroded
As a result of this elaborate scheme, CytoDyn raised approximately $300 million from investors, a significant portion of which was siphoned off by the defendants. Pourhassan personally received $4.4 million from his illicit stock sales, while Kazempour and his company pocketed over $22 million. This case highlights the devastating consequences of securities fraud, not only for individual investors who suffer financial losses but also for the erosion of public trust in the biotechnology industry and the regulatory process.
Justice Prevails: Defendants Face Lengthy Prison Sentences
After a thorough investigation by the FBI, FDA Office of Criminal Investigations, and the U.S. Postal Inspection Service, Pourhassan and Kazempour were brought to justice. Pourhassan was convicted of four counts of securities fraud, two counts of wire fraud, and three counts of insider trading. Kazempour was convicted of one count of securities fraud and one count of wire fraud. They each face a maximum penalty of 20 years in prison for each count, underscoring the severity of their crimes.
Protecting Investors and Upholding Market Integrity
This case sends a powerful message that the Justice Department is committed to pursuing and prosecuting those who engage in securities fraud, particularly those who exploit public health crises for personal gain. By holding these executives accountable for their actions, the Justice Department reaffirms its dedication to protecting investors and maintaining the integrity of the financial markets.
