Two former biotech CEOs found guilty in stock fraud case

Two former biotech executives were convicted by a federal jury in Maryland for their involvement in a securities fraud scheme linked to CytoDyn (OTC:CYDY ) Inc., a biotech firm from Vancouver, Washington. Nader Pourhassan and Kazem Kazempour were found guilty of deceiving investors about the development of a drug, leading to an artificial inflation of the company's stock.

Evidence presented at trial showed that Pourhassan, 61, and Kazempour, 71, misled investors about CytoDyn's progress with an investigational drug intended to treat HIV and COVID-19. Pourhassan served as the 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 that the drug had been submitted for FDA approval, and used these misrepresentations to sell their personal shares at inflated prices.

During the period between 2018 and 2021, while CytoDyn was seeking FDA approval for its drug, the two executives diverted funds for personal gain, including selling CytoDyn stock. Pourhassan offloaded over 4.8 million shares following a false announcement in Spring 2020 regarding the drug's submission to the FDA. They also misrepresented the drug's potential as a COVID-19 treatment, despite knowing the clinical trials had failed and the FDA had concerns about the data provided.

The scheme enabled CytoDyn to raise about $300 million from investors, with over $22 million paid to Kazempour's company and millions more in profits from stock sales going to the defendants. Principal Deputy Assistant Attorney General Nicole M. Argentieri emphasized the Justice Department's dedication to prosecuting those who exploit public health crises for personal profit. U.S. Attorney Erek L. Barron echoed this sentiment, stressing the harm caused by white-collar criminals.

The convictions serve as a stern warning against stock manipulation and defrauding investors. Assistant Director Chad Yarbrough of the FBI's Criminal Investigative Division reaffirmed the FBI's resolve in tackling such fraudulent schemes. Special Agent in Charge Robert Iwanicki of the FDA-OCI and Inspector in Charge Eric Shen of the USPIS highlighted the importance of accountability and protecting public health and financial systems from fraudulent activities.

Pourhassan was convicted on multiple counts, 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 occur at a future date, with both facing up to 20 years in prison for each count. The case was investigated by the FBI, FDA-OCI, and USPIS, with prosecution led by Trial Attorneys Lauren Archer, Matthew Reilly, and Senior Litigation Counsel Vasanth Sridharan, alongside Assistant U.S. Attorney Adeyemi Adenrele.

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Source: Investing.com