Beginning in 2018 and through 2021, CytoDyn and its former CEO Nader Pourhassan told investors repeatedly that a clinical trial had successfully demonstrated the effectiveness of an experimental treatment for HIV, and that a completed marketing application had been submitted to the U.S. Food and Drug Administration.
None of the statements made by Pourhassan were true, federal prosecutors in Maryland said Tuesday in an unsealed indictment that charged Pourhassan with allegedly scheming to defraud CytoDyn investors and personally profiting by selling shares of the company’s stock.
Also charged in the alleged securities fraud conspiracy was Kazem Kazempour, CEO of Amarex, a private company that managed CytoDyn’s clinical trials and acted as the company’s regulatory consultant with the FDA.
“The indictment alleges that these defendants conspired to defraud investors in order to line their own pockets,” said Erek Barron, U.S. Attorney for the District of Maryland, in a statement. “Investors must be able to rely on the statements of biotech companies about their products. Executives who knowingly mislead investors must be held accountable.”
By repeatedly lying about the development and regulatory status of Cytodyn’s HIV drug, called leronlimab, Pourhassan artificially inflated the company’s stock price and sold $15.8 million in CytoDyn stock that netted him nearly $5 million in profits, federal prosecutors alleged.
Kazempour sold $420,000 worth of CytoDyn stock for profits of more than $340,000, the government said.
Pourhassan and Kazempour were charged with multiple counts of securities fraud and wire fraud, and if convicted, they would face a maximum prison sentence of 20 years on each count.
I don’t like to gloat about other people’s misfortunes, but I must admit to feeling vindicated about Tuesday’s indictments. For years, I have chronicled Pourhassan’s escapades as the CEO of CytoDyn, laying out in scrupulous details how statements he made about the company and its drug leronlimab were false or misleading.
Pourhassan was singularly focused on pumping CytoDyn’s stock price for his personal gain — probably more than any other biotech executive that I’ve reported on in my 20-plus years covering the biotech industry.
In a glorious twist, a civil lawsuit involving CytoDyn and Amarex filed last year actually revealed the alleged crimes that Pourhassan and Kazmepour were charged with today.
But even worse than the alleged financial crimes he committed, Pourhassan’s actions adversely affected people suffering from catastrophic illnesses.
I feel bad for CytoDyn shareholders who lost their investments because of the lies allegedly told by Pourhassan, but I feel even worse for the people with HIV, cancer, and Covid-19 who were allegedly victimized by Pourhassan so he could pocket millions of dollars.
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