In March 2021, Terren Scott Peizer, the former CEO and chairman of Ontrak, a health care company based in Nevada, was indicted for his involvement in a multimillion-dollar insider trading scheme. A federal jury in Los Angeles has now convicted Peizer of one count of securities fraud and two counts of insider trading. This case is notable because it is the first prosecution by the Justice Department based exclusively on Rule 10b5-1, which allows company insiders to create pre-determined plans to trade shares while setting limits on certain trading practices.
According to the Justice Department, Peizer violated these limits when he set up trading plans in 2021 to sell shares and avoid over $12.5 million in losses after learning that Ontrak’s largest customer was planning to terminate its contract. When this news became public, Ontrak’s stock price dropped significantly. Deputy Assistant Attorney General Nicole M. Argentieri emphasized that the Justice Department will continue to pursue insider trading cases involving trading plans that are established in bad faith.
Despite the conviction, one of Peizer’s lawyers, David Willingham, plans to appeal the decision. Testimony during the trial indicated that Peizer did not act in bad faith and relied on advice from his management team when creating the trading plans. Willingham described the verdict as a “travesty of justice” and vowed to continue fighting until it is overturned.
Peizer, who is 64 years old, will be sentenced in October and faces up to 25 years in prison for securities fraud and up to 20 years for each count of insider trading
