CEO Receives Federal Prison Sentence for Misusing Stock Trading Plans
Terren Scott Peizer, the former CEO and board chairman of Ontrak Inc., has been sentenced to three and a half years in federal prison for executing an insider trading scheme that allowed him to avoid more than $12.5 million in losses. The sentence, handed down by U.S. District Judge Dale S. Fischer, also includes a $5.2 million fine and an order to pay $12.7 million in restitution.
Peizer, 65, who resides in Puerto Rico and Santa Monica, was convicted in June 2024 on one count of securities fraud and two counts of insider trading following a 10-day jury trial.
Federal prosecutors say Peizer misused Rule 10b5-1 trading plans—intended to provide legal protection for executives conducting pre-scheduled stock sales—to sell Ontrak shares based on non-public information. Specifically, Peizer acted while aware that Ontrak’s largest customer was likely to terminate its contract, which ultimately caused a dramatic drop in the company’s stock value.
The Justice Department emphasized that Peizer’s actions violated the intended protections of Rule 10b5-1. Although such plans are meant to shield executives from insider trading claims when created in good faith and without access to confidential information, Peizer allegedly designed his plans to circumvent these requirements.
He established two separate trading plans in May and August 2021 after learning critical details about the impending contract loss. In both instances, Peizer ignored legal advice and warnings from brokers and executives, opting to bypass any “cooling-off” period before executing trades.
Just days after executing his second plan, Ontrak publicly announced the contract’s termination. The company’s stock dropped more than 44% on the news.
Justice Department officials described the case as part of a broader data-driven effort to crack down on corporate executives misusing 10b5-1 plans. U.S. Attorney Bill Essayli said such abuses “undermine market integrity” and warned that those engaging in fraud will face prison time.
Matthew R. Galeotti, head of the DOJ’s Criminal Division, added that Peizer’s conviction “reflects the Criminal Division’s hard work and commitment to prosecuting frauds that harm American investors.”
The investigation was conducted by the FBI, with support from FINRA’s Criminal Prosecution Assistance Group. Assistant U.S. Attorney Jonathan S. Galatzan handled forfeiture proceedings in coordination with the DOJ Fraud Section attorney Matthew Reilly.
