The U.S. Department of Justice announced that Terren Scott Peizer, former chairman and chief executive officer of publicly traded health care company Ontrak Inc., was sentenced to 42 months in prison for insider trading through the use of Rule 10b5-1 trading plans to avoid losses of more than USD 12.5 million. The U.S. District Court for the Central District of California also imposed a USD 5.25 million fine and ordered forfeiture of more than USD 12.7 million. The DOJ described the matter as the first insider trading prosecution based exclusively on the use of Rule 10b5-1 trading plans and tied it to a data-driven initiative led by the Criminal Division’s Fraud Section to identify executive abuses of such plans. Prosecutors said Peizer adopted two 10b5-1 plans in 2021 after learning of deteriorating relations with Ontrak’s largest customer and impending contract termination, declined to use a cooling-off period despite warnings, and began selling stock the next trading day after each plan was established; following Ontrak’s announcement of contract termination on 19 August 2021, the company’s stock price fell by more than 44%. Peizer was convicted in June 2024 after a 10-day jury trial of one count of securities fraud and two counts of insider trading.

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