Florida CEO Peizer Lands 42 Months for Insider Trading Scheme

LOS ANGELES – In a major blow to corporate accountability, former Ontrak Inc. CEO and Chairman Terren Scott Peizer, 65, was sentenced to 42 months in federal prison for orchestrating a brazen insider trading scheme that cost investors over $12.5 million.

According to the U.S. Department of Justice, Peizer, a resident of Puerto Rico and Santa Monica, exploited his position as CEO and Chairman to sell Ontrak stock before a substantial price decline, using Rule 10b5-1 trading plans to avoid detection. The sentence, handed down by U.S. District Judge Dale S. Fischer, also includes a $5.2 million fine and the forfeiture of $12.7 million in ill-gotten gains.

The case is a first-of-its-kind prosecution, relying exclusively on the use of Rule 10b5-1 trading plans. Peizer’s scheme involved entering into two such plans while in possession of material, non-public information concerning the potential termination of Ontrak’s largest customer contract.

As the investigation revealed, Peizer was warned by brokers, a senior Ontrak executive, and attorneys about the need for a ‘cooling-off’ period between establishing the plan and selling stock. However, he chose to ignore these warnings and began selling shares on the next trading day after each plan was adopted.

The consequences were devastating, with Ontrak’s stock price plummeting by over 44% after the customer terminated its contract in August 2021. The FBI, with assistance from the Financial Industry Regulatory Authority’s (FINRA) Criminal Prosecution Assistance Group, investigated the case, which was prosecuted by the U.S. Attorneys Office and Matthew Reilly of the Justice Department’s Criminal Division’s Fraud Section.

Assistant U.S. Attorney Jonathan S. Galatzan handled the forfeiture proceedings. The case serves as a stark reminder of the importance of holding corporate leaders accountable for their actions and the consequences of exploiting the trust of investors.

As U.S. Attorney Bill Essayli stated, “Insiders must not be allowed to put their thumbs on the scales of the stock market. Individuals who impugn the integrity of our markets can and will face prison time for their crimes.”