Former Biotech Executives Convicted for Securities Fraud
Two former biotech executives, Nader Pourhassan and Kazem Kazempour, were convicted by a federal jury in Maryland for their roles in a securities fraud scheme linked to CytoDyn (OTC:CYDY) Inc., a biotechnology firm based in Vancouver, Washington.
The Scheme
The jury found that Pourhassan, aged 61 and former CEO of CytoDyn, and Kazempour, aged 71 and CEO of Amarex Clinical Research LLC, misled investors about the development of an investigational drug aimed at treating HIV and COVID-19. They falsely claimed the drug had been submitted for FDA approval, leading to an artificial inflation of the company's stock price.
Evidence during the trial demonstrated that between 2018 and 2021, as CytoDyn sought FDA approval for the drug, the executives redirected funds for personal enrichment, including selling CytoDyn shares. Pourhassan sold over 4.8 million shares after a misleading announcement in Spring 2020 about the drug's approval submission.
Legal Consequences
The fraudulent activities raised approximately $300 million from investors, with Kazempour’s company receiving over $22 million. Both executives profited significantly from stock sales despite knowing that clinical trials had failed and the FDA was concerned about the data provided.
U.S. officials stressed the importance of accountability for those exploiting public health crises. Pourhassan was convicted of multiple counts, including four counts of securities fraud, two counts of wire fraud, and three counts of insider trading, while Kazempour was found guilty of one count each of securities fraud and wire fraud. They could face up to 20 years in prison per count.
This case was pursued by the FBI, FDA-OCI, and USPIS, with prosecutors emphasizing the need to combat stock manipulation and protect investors from fraud.
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