Former Ontrak Chairman Convicted in Insider Trading Scheme

Ontrak Inc.'s former CEO and chairman Terren Peizer was convicted Friday by a Los Angeles federal jury of insider trading on information about a major customer leaving the health company to avoid losing almost $13 million, the US Attorney’s Office announced on Friday.

A jury in the US District Court for the Central District of California found Peizer, 64, guilty of one count of securities fraud and two counts of insider trading, according to the statement.

Peizer used prearranged stock-sale plans to trade before the news of the customer’s departure became public and the company’s stock price plummeted. His conviction is an early outcome of a sweeping federal investigation that launched in March 2023.

Prearranged stock sale programs set in advance when insider executives can sell shares in their companies to prevent insider trading. Peizer used loopholes to thwart the programs, the federal government said when he was charged.

“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,” Principal Deputy Assistant Attorney General Nicole M. Argentieri said in a Friday statement. “We will not let corporate executives who trade on inside information hide behind trading plans they established in bad faith.”

Ontrak and four top leaders beat investor allegations in February that they failed to share information about the company’s relationship with Aetna Inc. and Cigna Corp., two major customers, before suddenly breaking both contracts.

A federal judge tossed that suit, saying the investors didn’t show that the company or its leaders intentionally misled them.

Peizer’s sentencing hearing is scheduled for Oct. 21. He faces up to 65 years in prison.

The case is SEC v. Peizer, C.D. Cal., No. 2:23-cv-01511, 6/21/24.