Two Former Biotechnology CEOs Found Guilty in Stock Fraud Case
A federal jury in Maryland found two former biotechnology executives guilty of involvement in a securities fraud scheme linked to CytoDyn Inc., a biotechnology firm based in Vancouver, Washington. Nader Pourhassan and Kazem Kazempour were found guilty of misleading investors about the development of a drug, leading to the artificial inflation of the company’s stock price.
Evidence presented in court showed that 61-year-old Pourhassan and 71-year-old Kazempour misled investors regarding CytoDyn's progress with a drug in the research stage for the treatment of HIV and COVID-19. Pourhassan served as CEO of CytoDyn, while Kazempour was the CEO of Amarex Clinical Research LLC, the contract research organization conducting CytoDyn's clinical trials. They falsely claimed the drug had been submitted for FDA approval and used this misinformation to sell their personal shares at inflated prices.
Between 2018 and 2021, while pursuing FDA approval for the CytoDyn drug, the two executives used funds for personal gain, including the sale of CytoDyn shares. Pourhassan sold more than 4.8 million shares following a misleading announcement regarding the drug's submission to the FDA in the spring of 2020. Furthermore, despite knowing that the clinical trials had failed and the FDA had concerns about the data provided, they misrepresented the drug's potential for treating COVID-19.
This scheme enabled CytoDyn to raise approximately $300 million from investors, over $22 million of which was paid to Kazempour's company, with millions more from share sales going to the defendants. Deputy Assistant Attorney General Nicole M. Argentieri emphasized the Justice Department's commitment to prosecuting individuals who exploit public health crises for personal gain. U.S. Attorney Erek L. Barron reiterated this sentiment, highlighting the harm caused by white-collar criminals.
These convictions serve as a stern warning against stock manipulation and defrauding investors. FBI Criminal Investigative Division Assistant Director Chad Yarbrough reaffirmed the FBI's determination to combat such fraudulent schemes. Robert Iwanicki, Special Agent in Charge of the FDA-OCI, and Eric Shen, Inspector in Charge of the USPIS, emphasized the importance of accountability and protecting public health and financial systems from fraudulent activities.
Pourhassan was convicted on multiple charges, including four counts of securities fraud, two counts of wire fraud, and three counts of insider trading. Kazempour was found guilty of one count each of securities fraud and wire fraud. Sentencing will take place at a later date, and both face up to 20 years in prison for each count. The investigation was conducted by the FBI, FDA-OCI, and USPIS, with the prosecution led by Assistant U.S. Attorney Adeyemi Adenrele, along with Trial Attorneys Lauren Archer, Matthew Reilly, and Senior Trial Attorney Vasanth Sridharan.