Reported by Dave Michaels

The founder of telehealth provider Ontrak Inc. was charged in a first-of-its-kind criminal insider-trading case, with prosecutors alleging he sold millions of dollars worth of stock while misusing a trading plan that executives normally deploy to shield themselves from such suspicions.

Ontrak chief executive Terren Peizer set up the prearranged trading plans in May and August 2021, just before his company disclosed the loss of health insurer CignaCorp. as a major customer, according to a federal grand jury indictment unsealed Wednesday. Mr. Peizer sold about 641,000 shares of Ontrak stock when he was aware of the undisclosed bad news, according to the Securities and Exchange Commission, which also sued him. When Ontrak revealed on Aug. 19, 2021—three days after he began trading—that Cigna cut ties with Ontrak, the stock dropped 45%. 

The case is novel because it focuses on Mr. Peizer’s use of a so-called 10b5-1 trading plan. Executives and corporate directors have used the prearranged trading plans to sell while immunizing themselves against claims of insider trading. Regulators recently revised the rule governing 10b5-1 plans to address concerns that some executives abused them.

Read full report: https://www.wsj.com/articles/sec-alleges-healthcare-executive-made-illicit-stock-sales-through-prearranged-trades-b6347873?mod=politics_lead_pos11