PORTLAND, Ore. (KOIN) – Two former biotechnology executives were convicted by a federal jury in Maryland on Monday after misleading investors about a drug in order to inflate their stock price, the United States Department of Justice announced.
According to court documents, 61-year-old Nader Pourhassan, of Lake Oswego and 71-year-old Kazem Kazempour of Potomac, Maryland deceived investors about leronlimab, a medication developed by Vancouver, Washington-based CytoDyn Inc.
Between 2018 and 2021, CytoDyn sought approval for the drug from the Food and Drug Administration to treat HIV and COVID-19, authorities explained.
At the time, Pourhassan served as CEO of CytoDyn and Kazempour was CEO of Amarex Clinical Research LLC, a Maryland-based research organization that was hired to conduct CytoDyn’s clinical trials and served as the company’s representative with the FDA.
Authorities said Pourhassan and Kazempour made false and misleading statements about the timeline and status of CytoDyn’s submissions to the FDA and sold personal shares of CytoDyn stock at artificially inflated prices.
“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 Argentieri. “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.”
In the spring of 2020, the men falsely said the drug was submitted for approval to treat HIV, when they knew they submitted an incomplete application that the FDA would refuse to review, the DOJ said.
According to authorities, immediately after the men announced the FDA submission, Pourhassan sold more than 4.8 million shares of CytoDyn.
Around that time, Pourhassan also misrepresented the status of CytoDyn’s investigation and development of leronlimab as a potential treatment for COVID, officials said, noting he misrepresented the results of clinical trials and the likelihood of FDA approval.
Authorities said Pourhassan knew the drug’s clinical studies failed and the FDA did not approve the drug to treat COVID, adding that the agency was concerned that the submitted data was misleading.
During the scheme, CytoDyn made about $300 million from investors, $22 million of which was paid to Kazempour’s company. Pourhassan received $4.4 million and Kazempour received more than $340,000 from selling CytoDyn stock, officials said.
“These convictions highlight the serious consequences of defrauding investors and manipulating stock prices,” said FBI Criminal Investigative Division Assistant Director Chad Yarbrough. “This case reinforces the FBI’s commitment to proving that no scheme, no matter how elaborate, is beyond the reach of the law. We will continue to pursue those who put personal profit above public trust.”
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 related to his application for approval from the FDA and his attempt to trade CytoDyn shares the next day.
Officials said Pourhassan and Kazempour will be sentenced at a later date, noting the men face a maximum penalty of 20 years in prison for each count of securities fraud, wire fraud, and insider trading.
A spokesperson for Amarex told KOIN 6 News the company was notified of the verdict, adding, that Kazempour "separated" from Amarex in 2022. The spokesperson said Amarex is not contracting with CytoDyn.
