CALIFORNIA — Former Ontrak Inc. CEO Terren Scott Peizer, 65, was sentenced on June 23 to 42 months in federal prison for insider trading to avoid $12.5 million in losses, the U.S. Department of Justice announced.
U.S. District Judge Dale S. Fischer also ordered Peizer, a Santa Monica and Puerto Rico resident, to pay a $5.2 million fine and $12.7 million in restitution. A jury convicted him in June 2024 of securities fraud and two counts of insider trading following a 10-day trial.
“Terren Peizer betrayed the trust of Ontrak’s investors by trading on inside information to sell stock before a major price drop,” said DOJ Criminal Division head Matthew R. Galeotti. He emphasized the DOJ’s commitment to tackling sophisticated securities fraud.
The case is part of a DOJ effort targeting abuses of Rule 10b5-1 trading plans, which executives use to shield against insider trading charges. However, these plans offer no protection if based on material nonpublic information or created in bad faith.
Peizer avoided losses by using two 10b5-1 plans while aware of nonpublic details that Ontrak’s largest customer intended to terminate its contract. He initiated his first plan in May 2021 after learning about the strained relationship and the customer’s reservations, and a second plan in August 2021, shortly after being informed the contract was likely ending.
Ignoring warnings from brokers, an Ontrak executive, and attorneys, Peizer skipped the “cooling-off” period and began selling shares immediately after setting each plan. On August 19, 2021, six days after his second plan, Ontrak announced the contract termination, sending its stock down over 44%.
The FBI led the investigation with assistance from FINRA’s Criminal Prosecution Assistance Group.
