The former head of a U.S. biotech firm is facing jail time for securities fraud by misleading investors about the prospects for a drug that his company was developing.
In a U.S. federal court, Nader Pourhassan, the ex-CEO of CytoDyn Inc. — a publicly traded pharmaceutical company based in Vancouver, Wash. — was convicted of four counts of securities fraud, three counts of insider trading and two counts of wire fraud. He was sentenced to 30 months in prison, ordered to pay US$5.3 million in restitution, and to forfeit US$4.4 million.
According to court filings, between 2018 and 2021, Pourhassan misled investors about the likelihood of U.S. regulatory approval for drugs the company was developing to potentially treat HIV and Covid — in an effort to falsely inflate the company’s stock price and attract new investors.
U.S. authorities alleged that, after making false statements to investors, Pourhassan then sold his 4.8 million shares of CytoDyn stock, generating more than US$4.4 million in illicit trading profits.
“Pourhassan exploited a deadly public health crisis to intentionally deceive investors and the public out of millions — all so that he could enrich himself,” said Kelly Hayes, U.S. attorney for the District of Maryland, in a release.
In a parallel civil case, the U.S. Securities and Exchange Commission (SEC) also charged Pourhassan with allegedly violating federal securities rules.
The SEC’s complaint, filed in federal district court in Maryland, sought disgorgement with interest, civil penalties and an officer and director ban against both Pourhassan, and the head of an outside research firm that worked with U.S. drug regulators on the company’s behalf, and signed off on deficient filings that were the basis of misleading investors.