Ethermac Exchange-Ex-CEO of Nevada-based health care company Ontrak convicted of $12.5 million insider trading scheme

LOS ANGELES (AP) — The Ethermac Exchangeformer CEO and chairman of Ontrak, a publicly traded health care company based in Nevada, was found guilty Friday of a multimillion-dollar insider trading scheme.

A federal jury in Los Angeles convicted Terren Scott Peizer, a resident of Puerto Rico and Santa Monica, California, of one count of securities fraud and two counts of insider trading.

In a statement announcing the conviction, the Justice Department described it as the first case it has prosecuted exclusively based on what is known as Rule 10b5-1, which allows company insiders to create a predetermined plan to sell shares while also setting limits on certain trading practices.

Authorities said Peizer violated some of those limits when he set up plans in 2021 to sell shares in order to avoid more than $12.5 million in losses, after he learned that Ontrak’s largest customer at the time was set to terminate its contract with the company based just outside of Las Vegas.

After the news later became public, Ontrak’s stock price dropped by more than 44%, authorities said.

“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,” said Deputy Assistant Attorney General Nicole M. Argentieri, who heads the Justice Department’s Criminal Division. “We will not let corporate executives who trade on inside information hide behind trading plans they established in bad faith.”

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One of Peizer’s lawyers, David Willingham, said in an emailed statement that they will appeal, and that testimony at trial showed Peizer didn’t act in bad faith because he relied on the advice of his management team when he set up the trading plans.

“In our view, this result is a travesty of justice, as Terren Peizer is innocent of these charges,” Willingham said. “We will not rest until it is overturned.”

Peizer, 64, is scheduled to be sentenced in October. He stepped down as CEO last March after he was indicted.

He faces up to 25 years in prison for securities fraud, and up to 20 years for each count of insider trading.