March 6, 2023

SEC charges healthcare executive with insider trading in connection with two Rule 10b5-1 trading plans

The US Securities and Exchange Commission charged Terren S. Peizer, Executive Chairman of Ontrak Inc., a California-based behavioral health company, with insider trading in connection with the sale of Ontrak stock under two Rule 10b5-1 trading plans that he established in the name of his personal investment vehicle, Acuitas Group Holdings, LLC. While the Rule 10b5-1 trading plans were touted as having been “established at a time when the Insider was not in possession of material non-public information,” the SEC alleges that Peizer was in possession of potentially negative nonpublic information regarding Ontrak’s largest customer.

According to the SEC’s complaint, in May 2021, Peizer allegedly sold more than 600,000 shares of Ontrak stock through a Rule 10b5-1 trading plan that he established while fully aware that Ontrak’s largest customer at the time was dissatisfied with Ontrak and was threatening to terminate its contract with the company. This nonpublic information was particularly material because another major customer had terminated its contract with Ontrak just a few months earlier. Peizer established a second Rule 10b5-1 trading plan in August 2021 and allegedly sold another 45,000 shares shortly after Ontrak was notified that its customer was on the verge of ending its contract. On August 19, 2021, Ontrak announced publicly that the unnamed customer had terminated its contract with Ontrak, which caused the company’s stock price to drop by more than 44 percent from the prior trading day. The SEC alleges that Peizer, who sold almost $20 million in securities through the 10b5-1 trading plans, was able to avoid losses of over $12.7 million by engaging in the scheme.

In the complaint, which was filed on March 1, 2023 in the Central District of California, the SEC charges Peizer and Acuitas with violating antifraud provision in Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Section 17(a) of the Securities Act.  Peizer is also charged with control person liability under Section 20(a) of the Exchange Act. The SEC is also seeking a permanent injunction, disgorgement and prejudgment interest, and civil penalties in its complaint and is requesting that Peizer be barred from servicing as an officer and director of a public issuer.

On the same day, the US Department of Justice announced that a parallel action had been filed against Peizer charging him with two counts of securities fraud in connection with the alleged insider trading scheme.

SEC Press Release | SEC Complaint | DOJ Press Release | Indictment| DOJ Case Summary