Two biotech CEOs charged with defrauding investors

Two biotech chief executive officers have been indicted for their roles in defrauding investors in CytoDyn, a company developing an investigational drug to treat human immunodeficiency virus, or HIV, according to a federal grand jury in the District of Maryland.

The court documents, unsealed on Tuesday, show Nader Pourhassen, of Lake Oswego, Ore., and Kazem Kazempour, of Potomac, Md., allegedly conspired to defraud investors through "false and misleading representations" relating to CytoDyn's development of the drug leronlimab.

"Leronlimab is a humanized monoclonal antibody that is a once-a-week subcutaneous injection that can also be administered intravenously," according to CytoDyn, which is based in Vancouver, Wash. "The platform drug is used for various therapeutic indications, including NASH, NASH/HIV, oncology and HIV."

Pourhassen, 59, was CytoDyn's president and CEO at the time of the alleged fraud. Kazempour, 69, is the co-founder, president and CEO of Amarex Clinical Research that managed CytoDyn's clinical trials.

Court documents say the two CEOs allegedly deceived investors about the status of CytoDyn's regulator submissions to the Food and Drug Administration to artificially inflate the price of CytoDyn's stock.

"The indictment alleges that these defendants conspired to defraud investors in order to line their own pockets," said U.S. Attorney Erek Barron for the District of Maryland.

"Investors must be able to rely on the statements of biotech companies about their products. Executives who knowingly mislead investors must be held accountable," Barron said.

In April 2020, court documents show CytoDyn and Amarex repeatedly missed publicized timelines. Pourhassan allegedly directed Amarex to submit the company's incomplete biologics license application so CytoDyn could announce to investors that the BLA had been submitted, even though both CEOs knew that the FDA would refuse the incomplete application.

In October, CytoDyn announced it was withdrawing the leronlimab BLA. Pourhassen was terminated in January.

"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," said Special Agent in Charge Thomas Sobocinski of the FBI Baltimore Field Office.

"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."

The indictment also alleges that Pourhassan made false and misleading representations about CytoDyn's investigation and development of leronlimab as a possible treatment for COVID-19, despite clinical studies failing to achieve necessary results for FDA approval.

Pourhassan and Kazempour are each charged with one count of conspiracy to commit securities fraud and wire fraud, three counts of securities fraud and two counts of wire fraud related to the HIV BLA scheme.

Pourhassan is separately charged with an additional count of securities fraud, an additional count of wire fraud related to the COVID-19 scheme and three counts of insider trading. Kazempour is separately charged with one count of making false statements to federal law enforcement agents.

If convicted, both men face a maximum of 20 years in prison on each securities and wire fraud count, and five years for each conspiracy and false statements count.