Two biotech presidents indicted in Maryland for securities fraud | USAO MD

Baltimore, Maryland A federal grand jury has indicted Nader Pourhassan, age 59, of Lake Oswego, Oregon, and Kazem Kazempour, age 69, of Potomac Maryland, for their role in plans to defraud investors in CytoDyn Inc., a publicly traded biotechnology company based in Vancouver, Washington. Pourhassan was president and CEO of CytoDyns at the time of the alleged fraud. Kazempour is the co-founder, president and CEP of Amarex Clinical Research LLC (Amarex), a private company with offices in Germantown, Maryland, that administered CytoDyns clinical trials. The indictment was returned on December 15, 2022 and unsealed today following the arrests of the defendants.

The charges were announced by United States Attorney for the District of Maryland, Erek L. Barron; Assistant Attorney General Kenneth A. Polite of the Justice Department’s Criminal Division; Special Agent Thomas J. Sobocinski of the Federal Bureau of Investigation, Baltimore Field Office; Assistant Commissioner Catherine A. Hermsen of the FDA’s Office of Criminal Investigations (OCI); Responsible Postal Inspector Damon E. Wood of the US Postal Inspection Service – Washington Division.

The indictment alleges that these defendants conspired to defraud investors to line their own pockets, said U.S. Attorney Erek L. Barron for the District of Maryland. Investors should be able to rely on biotech companies’ statements about their products. Executives who knowingly mislead investors must be held accountable.

The Justice Department is committed to protecting the investing public from criminals who would exploit public health crises for personal gain, said Assistant Attorney General Kenneth A. Polite, Jr. of the Criminal Division of the Ministry of Justice. These indictments also confirm the department’s commitment, along with our law enforcement partners, to holding corrupt C-Suite executives who abuse their position and engage in securities fraud accountable for their actions.

According to the 14-count indictment, the defendants were involved in conspiracy and plans to defraud investors through false and misleading statements and material omissions related to CytoDyn’s development of leronlimab, an investigational monoclonal antibody drug also known as PRO 140, as a potential treatment for human immunodeficiency virus (HIV). Pourhassan and Kazempour allegedly misled investors about the timeline and status of CytoDyns regulatory filings with the U.S. Food and Drug Administration (FDA) to artificially inflate and maintain the price of CytoDyns stock and attract new investors, and for their personal gain, including by selling their shares. personal shares of CytoDyn stock. Amarex was CytoDyns’ regulatory agent in interactions with the FDA and Kazempour also served on the CytoDyns Disclosure Committee, which was responsible for reviewing and approving CytoDyns periodic filings with the U.S. Securities and Exchange Commission.

The suit further alleges that Pourhassan and Kazempour created and induced CytoDyn to make materially false and misleading statements about the timelines within which CytoDyn and Amarex would complete and submit CytoDyn’s biological license application (BLA) for HIV to the FDA. In April 2020, after CytoDyn and Amarex repeatedly missed published timelines, Pourhassan reportedly directed Kazempour and Amarex to file the BLA, even if it was incomplete, so that Pourhassan and CytoDyn could announce to investors that the BLA had been filed. Pourhassan and Kazempour reportedly knew that the FDA would refuse to review an incomplete BLA.

After Kazempour and Amarex reportedly submitted the incomplete BLA at Pourhassans’ direction, Pourhassan and CytoDyn misrepresented in a press release that a full BLA had been submitted to the FDA, when in reality and in fact it had not. Pourhassan then allegedly sold millions of dollars worth of CytoDyn stock based on material non-public information, including information that the BLA was truthful and, in fact, incomplete when it was filed.

Financial crimes such as securities fraud may not be violent, but they are certainly not victimless. The two individuals charged today have capitalized on the hopes of investors and the public by supporting new treatments for conditions that affect people and their families, Special Agent Thomas J. Sobocinski of the FBI’s Baltimore Field Office said. This indictment is a signal to all sophisticated white-collar criminals that no one is beyond the reach of the FBI and our law enforcement partners and that we will not tolerate the greedy intent of those in such trusted positions.

The conduct alleged in these indictments undermines public confidence in the safety and effectiveness of medical products, including drugs, said Assistant Commissioner Catherine A. Hermsen of the FDA’s Office of Criminal Investigations (OCI). The FDA would like to express our gratitude to our federal law enforcement partners for sending a strong message to biotechnology executives and others that such actions will not be tolerated.

The indictment also alleges that Pourhassan made, and caused CytoDyn to make, materially false and misleading statements about CytoDyn’s research and development of leronlimab as a potential treatment for COVID-19, including the results and importance of clinical investigations and the status of CytoDyns regulatory submissions. to the FDA. Pourhassan reportedly knew that clinical trials of leronlimabs did not, in fact, yield the results necessary to gain any kind of FDA approval for use as a treatment for COVID-19 and the results that CytoDyn publicly touted were neither statistically significant nor scientific responsible.

Throughout history, postal inspectors have scrutinized many investment programs and the one thing that’s always right, where there are large sums of money to be made, scammers are always lurking, said Inspector Eric Shen of the U.S. Postal Inspection Service (USPIS) Criminal Investigation Group. In this case, these individuals benefited from the dream of a possible new treatment for HIV and exploited investors while dashing the hopes of many who waited for a cure. Postal inspectors and their law enforcement partners will work tirelessly to bring those who violate regulatory and investment standards to justice, to keep the investment landscape safe and crime-free for the American public.

Pourhassan and Kazempour each face charges of conspiracy to commit securities fraud and electronic fraud, three counts of securities fraud and two counts of electronic fraud in connection with the HIV BLA scheme. Pourhassan is being charged separately with one additional count of securities fraud, one additional count of banking fraud related to the COVID-19 plan, and three counts of insider trading. Kazempour is charged separately with making false statements to federal law enforcement officials. Pourhassan and Kazempour made their first court appearances today in the District of Oregon and District of Columbia, respectively.

If convicted, Pourhassan and Kazempour would each face a maximum sentence of 20 years in prison for each count of securities fraud and electronic fraud, and five years in prison for conspiracy. Kazempour also faces a maximum sentence of five years in prison on the count of false statements. A federal district court judge will determine each sentence after considering the U.S. Sentencing Guidelines and other legal factors.

If you believe you have been a victim in this case, please contact the Fraud Sections Victim Witness Unit toll-free at (888) 549-3945 or by email at [email protected]. Victims can find case updates and additional information at: https://www.justice.gov/criminal-vns/case/CytoDyn-Inc.

An indictment is not a finding of guilt. A person charged by an indictment is presumed innocent unless and until proven guilty in subsequent criminal proceedings.

United States Attorney Erek L. Barron praised the FBI, FDA-CID and USPIS for their work in the investigation. Mr. Barron thanked Assistant US Attorneys Aaron SJ Zelinsky and Leo J. Wise, and Attorneys Christopher Fenton and Joshua DeBold and Assistant Chief Michael O’Neill of the Fraud Section of the Criminal Divisions, who prosecute.

For more information about the Maryland US Attorneys Office, its priorities and resources available to help the community, visit www.justice.gov/usao-md and https://www.justice.gov/usao-md/community-outreach.

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