The Securities and Exchange Commission has charged Terren S. Peizer, the Executive Chairman of Ontrak, Inc., a healthcare treatment company based in Santa Monica, California, with insider trading. Peizer is accused of selling over $20 million worth of Ontrak stock between May and August 2021 while possessing nonpublic negative information about the company’s largest customer.
The SEC’s complaint alleges that Peizer established a Rule 10b5-1 trading plan in the name of Acuitas Group Holdings, LLC, his investment vehicle, before May 2021. Prior to this, Peizer had learned about the fragile relationship between Ontrak and its largest customer, which accounted for more than half of the company’s revenue. Despite this knowledge, Peizer claimed to be unaware of any material nonpublic information and proceeded to execute the 10b5-1 plan, selling nearly 600,000 shares of Ontrak stock worth over $19.2 million. In August 2021, Peizer allegedly discovered that the customer was on the verge of terminating the contract, prompting him to adopt a second Rule 10b5-1 trading plan and sell an additional 45,000 shares worth more than $1.9 million.
On August 19, 2021, when Ontrak announced the termination of the customer contract, the company’s stock price plummeted by over 44 percent. The SEC complaint claims that Peizer managed to avoid losses of more than $12.7 million by executing the two trading plans. The complaint further alleges that Peizer and Acuitas devised the Rule 10b5-1 plans as part of a scheme to evade insider trading regulations, making Peizer ineligible for any affirmative defense under Rule 10b5-1 available to corporate insiders.
The SEC has filed the complaint against Peizer and Acuitas in the U.S. District Court in the Central District of California. The charges include violations of antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The SEC is seeking permanent injunctive relief, disgorgement of illicit gains with prejudgment interest, civil penalties, and an officer-and-director bar for Peizer.
In a separate action, the U.S. Department of Justice has announced criminal charges against Peizer. The SEC’s investigation, led by Emily Shea and Kevin Guerrero, is ongoing and focuses on executive trading under 10b5-1 plans. The litigation will be handled by Dean Conway, Emily Shea, and Kevin Guerrero, under the supervision of James Connor.
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The Securities Exchange Commission (SEC) is a regulatory agency in the United States that oversees and enforces federal securities laws. It was established in 1934 to protect investors, maintain fair and efficient markets, and facilitate capital formation. The SEC is responsible for regulating and supervising various participants in the securities industry, including securities exchanges, brokers, investment advisors, and mutual funds. Its main functions include enforcing securities laws, providing investor education, monitoring market activities, and ensuring companies disclose accurate and timely information to the public. The SEC plays a crucial role in maintaining investor confidence and promoting transparency in the financial markets.
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