Dec. 10 (UPI) — A federal jury this week in Maryland convicted two ex-CEOs of a Washington biotech company for their role in a multi-million dollar securities fraud scheme related to HIV and COVID-19 drugs, the U.S. Justice Department announced Tuesday.
The jury on Monday ruled that Nader Pourhassan, 61, of Lake Oswego, Ore., along with his counterpart 71-year old Kazem Kazempour of Potomac, Md., engaged in a scheme to lie to investors about development of an experimental drug in order to artificially inflate and maintain the price of its stock so as to attract new investors for CytoDyn Inc., a publicly traded biotechnology company based in Vancouver, Wash.
“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,” Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of DOJ’s criminal division, wrote Tuesday in a release.
The men are scheduled to be sentenced by a federal judge at a later date and face a maximum penalty of 20 years in prison for each count of securities and wire fraud along with insider trading.
Pourhassan was convicted on four counts of securities fraud, two counts of wire fraud and three counts of insider trading. Kazempour was convicted on one count of securities fraud and one count of wire fraud related to his submission of the application for approval from the FDA and attempt to trade Cytodyn shares the following day.
Pourhassan was CytoDyn’s CEO and Kazempour the head of Amarex Clinical Research LLC, which is a Germantown-based contract research organization in Maryland that was hired to conduct Cytodyn’s clinical trials.
CytoDyn sought approval for a drug from the Food and Drug Administration to treat HIV and COVID-19 from 2018 to 2021. The two sat as the company representatives with the FDA.
It was alleged Pourhassan and Kazempour made “false and misleading” statements about the timeline and status of CytoDyn’s regulatory FDA submissions.
During the scheme, officials said, CytoDyn raised approximately $300 million from unwitting investors of which more than $22 million was paid out to Kazempour. Pourhassan received more than $4 million and Kazempour received more than $340,000 off sales of CytoDyn stock.
Pourhassan allegedly engaged in a scheme at about the same time to misrepresent the status of CytoDyn’s investigation and development of leronlimab as a potential treatment for COVID-19, including the results of clinical trials and the likelihood of approval from the FDA.
The pair had falsely stated in spring 2020 the drug had been submitted for FDA approval to treat HIV all the while they allegedly knew that the submitted application was incomplete and the FDA would likewise refuse to review it.
He allegedly knew that leronlimab’s clinical studies failed and that the FDA did not approve the drug for use as a treatment for COVID-19 and had expressed concerns that the submitted data was misleading.
Immediately after, according to evidence, Pourhassan then sold off more than 4.8 million shares of Cytodyn.
According to court documents and evidence presented at trial, Pourhassan and Kazempour diverted proceeds for their own benefit, including by selling personal shares of CytoDyn stock at artificially inflated prices.
“These convictions highlight the serious consequences of defrauding investors and manipulating stock prices,” Assistant Director Chad Yarbrough of the FBI’s Criminal Investigative Division said Tuesday.