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Ontrak Exec Peizer Guilty of $12.5M Insider Trading Scam
LOS ANGELES – Terren Scott Peizer, 64, formerly the CEO and chairman of Nevada-based healthcare company Ontrak Inc., was found guilty today of a brazen insider trading scheme. A jury convicted Peizer of one count of securities fraud and two counts of insider trading after a ten-day trial, finding he illegally avoided losses exceeding $12.5 million.
Peizer, a resident of both Puerto Rico and Santa Monica, California, exploited the very systems designed to protect investors. Prosecutors detailed how he established two Rule 10b5-1 trading plans while possessing damaging, non-public information about the imminent termination of Ontrak’s largest contract. This wasn’t a mistake; it was a calculated maneuver to line his own pockets as the company’s stock value plummeted.
“Corporate executives and other insiders hold major power in our economy, but with that power comes responsibility,” stated United States Attorney Martin Estrada. “It is important that executives, such as this defendant, be held accountable when they line their own pockets at the expense of shareholders. That is why I created our office’s Corporate and Securities Fraud Strike Force. Today’s verdict sends a clear message that everyone, including corporate executives, must abide by the law.”
The scheme unfolded over the summer of 2021. Peizer initiated his first trading plan in May, after learning of the deteriorating relationship with the key customer. A second plan followed in August, a mere hour after confirmation that the contract would likely be terminated. Crucially, Peizer ignored warnings from brokers, a senior Ontrak executive, and legal counsel to allow a “cooling-off” period between establishing the plans and selling shares, instead dumping stock immediately. On August 19, 2021, just six days after adopting the second plan, the contract termination was announced, sending Ontrak’s stock price crashing down by over 44%.
“When Terren Peizer learned significant negative news about Ontrak, he set up Rule 10b5-1 trading plans to sell shares before the news became public and to conceal that he was trading on inside information,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri. “This is the Justice Department’s first insider trading prosecution based exclusively on the use of a trading plan, but it will not be our last.” The FBI echoed this sentiment, with Acting Assistant Director in Charge Krysti Hawkins stating, “As a CEO, Mr. Peizer abdicated his responsibilities by using his position to conceal trading on material non-public information in order to avoid the losses shareholders suffered.”
Peizer now faces a sentencing hearing on October 21, where he could receive a statutory maximum of 25 years in prison for the securities fraud count and up to 20 years for each of the two insider trading counts. This case is part of a broader Justice Department initiative targeting abuses of Rule 10b5-1 trading plans, demonstrating a commitment to cracking down on illegal activity within the corporate world and ensuring a level playing field for all investors. The message is clear: exploiting insider information will not be tolerated.
Key Facts
- State: California
- Agency: DOJ USAO
- Category: White Collar Crime
- Source: Official Source ↗
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