A federal jury in Maryland has found two biotech CEOs guilty of securities fraud, wire fraud, and insider trading in a deception involving CytoDyn Inc., a Vancouver-based biotech company. The U.S. Department of Justice announced the convictions of Nader Pourhassan and Kazem Kazempour for misleading investors about an investigational drug intended to treat HIV and COVID-19.
Pourhassan, 61, hailing from Lake Oswego, Oregon, formerly served as the CEO of CytoDyn, while Kazempour, 71, from Potomac, Maryland, led Amarex Clinical Research LLC, a firm conducting clinical trials for CytoDyn. The duo was accused of inflating CytoDyn's stock prices by fabricating information regarding the drug's development and approval status. According to the DOJ, between 2018 and 2021, CytoDyn raised about $300 million from investors, with more than $22 million paid to Kazempour's company, and personal gains of $4.4 million and $340,000 going to Pourhassan and Kazempour, respectively.
"The defendants lied to investors and the public — including during the height of the COVID-19 pandemic — about a drug that purportedly treated HIV and COVID-19 in order to artificially inflate CytoDyn’s stock price," stated Principal Deputy Assistant Attorney General Nicole M. Argentieri told the DOJ. Authorities stressed the severity of the deception and its impact on investors. U.S. Attorney Erek L. Barron emphasized, "White collar criminals cause irreparable harm to the public, and we will continue to bring them to justice without fear or favor." During the trial, it was revealed that not only were statements about the FDA submission process for the drug untruthful, but Pourhassan also falsely claimed the drug had been submitted for HIV treatment approval when the application was incomplete. Furthermore, he misled the public on the progress of leronlimab as a COVID-19 treatment, even after knowing the clinical studies had failed and the FDA had concerns about the data provided.
Assistant Director Chad Yarbrough of the FBI highlighted the determination of law enforcement agencies in rooting out fraud, stating, "This case reinforces the FBI’s commitment to proving that no scheme, no matter how elaborate, is beyond the reach of the law." Special Agent in Charge Robert Iwanicki of the FDA Office of Criminal Investigations also remarked on the commitment to accountability, saying, "Those who make misleading statements about clinical trial results... will be held accountable for their actions," a statement obtained by the DOJ.
Pourhassan is convicted on multiple counts, including four counts of securities fraud, two counts of wire fraud, and three counts of insider trading. Kazempour faces one count of securities fraud and one count of wire fraud, with sentencing scheduled for a later date. The maximum penalty for these offenses is 20 years in prison per count. The investigative efforts behind these convictions were led by the FBI, FDA-OCI, and the USPIS, and the trial attorneys Lauren Archer, Matthew Reilly, and Senior Litigation Counsel Vasanth Sridharan, as well as Assistant U.S. Attorney Adeyemi Adenrele, carried out the prosecution.
