A federal jury in Los Angeles found Terren Scott Peizer, the former CEO and chairman of Ontrak, a publicly traded health care company based in Nevada, guilty of a multimillion-dollar insider trading scheme. Peizer, a resident of Puerto Rico and Santa Monica, California, was convicted of one count of securities fraud and two counts of insider trading.
The case was prosecuted under Rule 10b5-1, which allows company insiders to create trading plans with predetermined parameters. Peizer was found to have abused these limits when setting up plans to sell shares in 2021 to avoid significant losses after learning that Ontrak’s largest customer was terminating its contract with the company. Following the public announcement of the customer contract termination, Ontrak’s stock price plummeted by over 44%.
Authorities highlighted this case as the Justice Department’s first insider trading prosecution based solely on the use of a trading plan. Deputy Assistant Attorney General Nicole M. Argentieri emphasized that corporate executives who engage in insider trading will not be able to evade accountability by hiding behind trading plans established in bad faith.
Peizer’s legal team plans to appeal the conviction, arguing that he acted in good faith and relied on advice from his management team when setting up the trading plans. Peizer, who stepped down as CEO in March, is expected to be sentenced in October. He faces a maximum of 25 years in prison for securities fraud and up to 20 years for each count of insider trading. The defense remains steadfast in its belief that Peizer is innocent and will continue to pursue avenues for appeal.
