The U.S. Securities and Exchange Commission (SEC) charged Nader Pourhassan, the former CEO of CytoDyn Inc., with fraud and insider trading for misleading shareholders about the progress of a clinical research treatment for COVID-19 and HIV. According to the SEC complaint, Pourhassan repeatedly issued press releases exaggerating CytoDyn’s progress on leronlimab, an antibody administered to patients in clinical trials to treat various diseases.
The complaint alleges that CytoDyn falsely announced in an April 2020 press release that it had filed an entire biologics license application with the U.S. Food and Drug Administration. This significant milestone drove up the company’s stock price. As outlined in the complaint, the FDA application needed to be more adequate. The FDA pointed out these deficiencies to the company within days; however, Pourhassan should have informed shareholders of this information. Meanwhile, Pourhassan allegedly sold approximately $15.8 million worth of CytoDyn stock based on the false information, generating profits of more than $4.7 million.
The SEC‘s complaint further alleges that Kazem Kazempour, CEO of a contract research organization that worked with the FDA on CytoDyn‘s behalf, signed off on the incomplete application and subsequently sold CytoDyn stock worth more than $420,000.
“We allege that the fraudulent actions of Pourhassan and Kazempour gave investors false hope that a new treatment for life-threatening diseases was closer to FDA approval than was the case, which then drove up the stock price,” said Sheldon L. Pollock, deputy director of the SEC‘s New York Regional Office. “We will continue to hold executives accountable when they use misleading information to drive up their company’s stock price and then sell their stock for a profit while keeping the public in the dark.”
The SEC‘s complaint, filed in federal district court in Maryland, charges Pourhassan and Kazempour with violations of the antifraud provisions of the federal securities laws and seeks restitution of ill-gotten gains with prejudgment interest, civil penalties, disqualification of officers and directors, and a permanent injunction.
In parallel, the U.S. Department of Justice announced criminal charges against Pourhassan and Kazempour.
Howard S. Kim and Jacqueline Fine are conducting the SEC’s ongoing investigation, and Adam S. Grace. Lee Greenwood of the New York Regional Office will lead the litigation. Mr Pollock is supervising the case.