SEC Charges Former CEO of Biotech Company CytoDyn with Fraud, Insider Trading
- Written by Newsfile
Washington, D.C.--(Newsfile Corp. - December 20, 2022) - The Securities and Exchange Commission today charged Nader Pourhassan, the former CEO of CytoDyn Inc., with fraud and insider trading in connection with providing misleading information to shareholders about the progress of a clinical research treatment for COVID-19 and HIV.
According to the SEC’s complaint, Pourhassan repeatedly issued press releases exaggerating CytoDyn’s progress with regard to leronlimab, an antibody that was administered to patients in clinical trials to treat various diseases. The complaint alleges that, in an April 2020 press release, CytoDyn falsely announced that the company had submitted a completed Biologics License Application to the U.S. Food and Drug Administration—a key milestone that caused the company’s stock price to increase. As set forth in the complaint, the FDA submission was woefully inadequate, and the FDA alerted the company of those deficiencies within days; however, Pourhassan did not alert shareholders to this information. In the meantime, Pourhassan allegedly sold approximately $15.8 million worth of CytoDyn stock based on the false information, netting profits of more than $4.7 million.
The SEC’s complaint further alleges that Kazem Kazempour, CEO of a contract research organization that interfaced with the FDA on CytoDyn’s behalf, signed off on the incomplete application and subsequently sold more than $420,000 of CytoDyn stock.
"We allege that Pourhassan’s and Kazempour’s fraudulent actions gave investors false hope that a new treatment for life-threatening diseases was closer to FDA approval than it really was, which then drove up the share price," said Sheldon L. Pollock, Associate Director of the SEC’s New York Regional Office. "We will continue to hold executives accountable when they use misleading information to inflate their company’s stock price and then sell their shares for a profit all while keeping the public in the dark."
The SEC’s complaint, filed in federal district court in Maryland, charges Pourhassan and Kazempour with violating the antifraud provisions of the federal securities laws and seeks disgorgement of ill-gotten gains with prejudgment interest, civil penalties, officer and director bars, and permanent injunctive relief.
In a parallel action, the U.S. Department of Justice today announced criminal charges against Pourhassan and Kazempour.
The SEC’s investigation, which is ongoing, is being conducted by Howard S. Kim, Jacqueline Fine, and Adam S. Grace. The litigation will be led by Lee Greenwood of the New York Regional Office. The case is being supervised by Mr. Pollock.