Two former CEOs were recently convicted for their roles in a scheme to lie to investors in a publicly traded biotechnology company, CytoDyn Inc. Nader Pourhassan and Kazem Kazempour together engaged in a scheme to deceive investors about CytoDyn’s development of an investigational drug, leronlimab, in an attempt to artificially inflate (and maintain) the company’s stock price.
Leronlimab is a monoclonal antibody investigational drug also known as PRO 140 and has been considered a potential treatment for human immunodeficiency virus (HIV). Pourhassan also sought to have the drug approved by the FDA for the treatment of COVID-19.
According to the Department of Justice, between 2018 and 2021, CytoDyn sought approval for leronlimab to treat HIV and COVID-19 from the Food and Drug Administration (FDA). Pourhassan was the CEO of CytoDyn while Kazempour was the CEO of Amarex Clinical Research LLC, a contract research organization that was hired to conduct CytoDyn’s clinical trials and served as the company’s representative with the FDA.
Pourhassan and Kazempour made false statements about the timeline and status of CytoDyn’s regulatory submissions to the FDA. In April 2020, after CytoDyn and Amarex missed publicized timelines, Pourhassan directed Kazempour and Amarex to submit the biologics license application (BLA) to the FDA even if it was incomplete, so that Pourhassan and CytoDyn could announce to investors that the BLA had been submitted. Pourhassan and Kazempour both knew that the FDA would not review an incomplete BLA and went on to state in a press release that CytoDyn submitted a “complete” BLA to the FDA. Immediately after that statement, Pourhassan sold more than 4.8 million shares of CytoDyn.
Around the same time, Pourhassan engaged in a scheme to misrepresent the status of CytoDyn’s investigation and development of leronlimab as a treatment for COVID-19. Through this scheme, he misrepresented results of clinical trials and the likelihood of approval from the FDA. Pourhassan knew that the clinical studies failed and that the drug was not approved for use in treating COVID-19, with the FDA even raising concerns that the data submitted to them was misleading.
Through the relevant time period, CytoDyn raised roughly $300 million from investors, including $22 million paid to Amarex Clinic Research. By selling their own shares of CytoDyn, Pourhassan and Kazempour received more than $4.4 million and $340,000 respectively.
For his role in the scheme, Pourhassan was convicted of four counts of securities fraud, two counts of wire fraud, and three counts of insider trading. Kazempour was convicted of one count of securities fraud and one count of wire fraud. Kazempour’s wire fraud conviction was connected to his submission of the application to the FDA followed by him attempting to trade CytoDyn shares the next day. Pourhassan and Kazempour face a maximum penalty of 20 years in prison for each count of securities fraud, wire fraud, and insider trading. Both are scheduled to be sentenced at a later date.
“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,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division. “The Justice Department is committed to protecting the investing public from criminals who would exploit public health crises for personal profit. These convictions confirm the department’s commitment, together with our law enforcement partners, to hold corrupt C-suite executives who abuse their positions and engage in securities fraud accountable for their actions.”