Biotech Executives Allegedly Misrepresented Progress Of HIV Treatment, Defrauded Investors

A federal grand jury in Maryland on Tuesday charged two men for conspiracy to defraud investors into the Vancouver, Washington based biotechnology company CytoDyn, which was developing experimental treatments for both Covid-19 and HIV.

Nader Pourhassan, CytoDyn’s president and CEO when the alleged fraud scheme occurred, and Kazem Kazempour, the co-founder, president, and CEO of Amarex Clinical Research LLC (Amarex), a private company that managed CytoDyn’s clinical trials managed regulatory compliance with the FDA were charged for their role in an alleged scheme to mislead investors about the progress and viability of treatments the company created.

In a parallel action on Tuesday, the Securities and Exchange Commission charged the pair for insider trading and violating federal antifraud provisions of the federal securities laws.

The commission is also seeking “disgorgement of ill-gotten gains with prejudgment interest, civil penalties, officer and director bars, and permanent injunctive relief.”

Pourhassan and Kazempour allegedly engaged in false and misleading portrayals of a drug CytoDyn was developing known as PRO 140, which they marketed as a potential treatment for HIV.

The pair allegedly used multiple tactics to deceive investors on the actual timeline and status of CytoDyn’s regulatory submissions to the U.S. Food and Drug Administration (FDA) in order to inflate and maintain the price of CytoDyn’s stock for their own benefit and so they could to allegedly sell their own shares of CytoDyn stock at advantageous pricepoints.

“We allege that Pourhassan’s and Kazempour’s fraudulent actions gave investors false hope that a new treatment for life-threatening diseases was closer to FDA approval than it really was, which then drove up the share price,” said Sheldon L. Pollock, Associate Director of the SEC’s New York Regional Office.

CytoDyn and Amarex co-founders Pourhassan and Kazempour allegedly knew the FDA would refuse to review an incomplete biologics license application, but submitted it anyway and investors it was complete. Prosecturos say that Kazempour then sold $420,000 of his stock based on non-public information.

Pourhassan also allegedly knew that clinical studies for CytoDyn’s leronlimab drug that failed to achieve the results necessary to obtain any form of FDA approval for use as a treatment for COVID-19 and the results CytoDyn publicly touted were neither statistically significant nor scientifically sound. Kazempour is separately charged with making false statements to federal law enforcement agents.

“Financial crimes like securities fraud may not be violent, but they certainly are not victimless. The two individuals charged today, capitalized on the hopes of investors and the public in supporting new treatments for ailments that affect people and their families,” Special Agent in Charge Thomas J. Sobocinski said.

“This indictment sends a message to all sophisticated white-collar criminals that no one is beyond the reach of the FBI and our law enforcement partners and we do not tolerate the greedy intentions of those in such trusted positions.”