A former biotech executive has been sentenced to prison after being found guilty of misleading investors and selling his own shares at inflated prices.
Nader Pourhassan, 62, of Lake Oswego, Oregon, was sentenced to 30 months in federal prison for securities fraud related to false claims about a drug his company was developing to treat HIV and COVID-19.
Pourhassan was the former CEO of CytoDyn (OTCMKTS: CYDY), a publicly traded biotech company based in Washington state.
What Happened
According to prosecutors, Pourhassan repeatedly made false and misleading statements between 2018 and 2021 about the company’s experimental drug and its chances of receiving FDA approval. These statements helped push CytoDyn’s stock price higher and attracted new investors.
While investors were buying shares based on those claims, Pourhassan sold 4.8 million shares of his own stock, making about $4.4 million.
Federal officials said the statements were not backed by scientific data and overstated the drug’s progress, particularly during the COVID-19 pandemic.
Criminal Conviction and Penalties
In December 2024, a jury convicted Pourhassan of:
- Four counts of securities fraud
- Two counts of wire fraud
- Three counts of insider trading
In addition to prison time, the court ordered him to:
- Pay more than $5.3 million in restitution
- Forfeit over $4.4 million in illegal gains
The FBI, FDA’s Office of Criminal Investigations, and the U.S. Postal Inspection Service investigated the case.
Why This Matters for Investors
This case highlights several important risks for investors, especially in biotech:
- Regulatory claims matter: Statements about FDA approval can move biotech stocks quickly, but they must be supported by data.
- Executive behavior is a red flag: Insider stock sales tied to promotional statements should raise concern.
- Biotech volatility: Early-stage drug companies often rely on future approvals, making them especially vulnerable to hype and misinformation.
- Enforcement is active: Regulators are closely watching claims related to medical products, especially those tied to public health crises.
Bigger Picture
Federal prosecutors emphasized that exploiting a health crisis for personal gain undermines trust in financial markets and harms everyday investors. The case serves as a warning that corporate executives can and will face prison time for misleading the public.
For investors, the takeaway is clear. Always question bold claims, review insider trading activity, and be cautious when stock prices surge on press releases rather than solid clinical data.
