Two CEOs from CytoDyn, a biotechnology company, have been convicted for lying to investors in a scheme that tricked people into thinking they were investing in a promising new drug. The two men, one based in Oregon and the other in Maryland, were found guilty of manipulating the stock price of CytoDyn Inc., a company based in Washington. They misled investors about the status of a drug meant to treat HIV and COVID-19, causing many to lose money. The case is a reminder of the serious consequences when people in charge use their power for personal gain, especially when it involves public health and safety.
The Scheme to Inflate CytoDyn’s Stock Prices
The fraud began between 2018 and 2021 when CytoDyn was working to get approval from the Food and Drug Administration (FDA) for a drug called leronlimab. The drug was being tested to treat HIV and COVID-19. However, CytoDyn’s top executives, including one of the convicted men, misled investors by giving false updates on the progress of the drug’s approval. They made it sound as if the FDA was close to approving the drug, when in reality, the FDA had not even reviewed the application because it was incomplete.
Despite knowing that the FDA had not accepted the drug for review, the executives made false statements to the public. They claimed that their drug was on the verge of being approved, which caused the price of CytoDyn’s stock to go up. While the stock price was artificially inflated, the two men sold millions of dollars’ worth of their shares, making a profit from the lies they told.
Investors Lose Money, CEOs Make Millions
The fraud didn’t just harm investors who trusted CytoDyn. It also misled the public, especially during the height of the COVID-19 pandemic when people were desperately hoping for treatments for the virus. The two men used the crisis to their advantage, pushing false promises of success with the new drug. They knew that the clinical trials for the drug had failed, and that there was no chance the FDA would approve it for use against COVID-19.
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However, they continued to mislead investors, even as they were selling off their personal shares of CytoDyn stock. Between 2020 and 2021, they raised over $300 million from investors, with millions going directly into their pockets. One of the men, for example, earned more than $4 million by selling his stock, while the other made over $340,000.
The false claims also included misrepresentations about the progress of the clinical trials, making it seem like the drug was closer to being approved than it really was. Investors were led to believe that the drug had a much higher chance of success than it actually did, causing them to pour money into CytoDyn.
Convictions and Serious Consequences
After a thorough investigation, the two men were convicted of multiple crimes, including securities fraud, wire fraud, and insider trading. These charges stemmed from their actions of deceiving the public and investors about the status of the drug, as well as profiting from their lies by selling shares at inflated prices.
The men face up to 20 years in prison for each of the counts they were convicted of, though the final sentence will be determined later by a judge. The case has drawn attention to the serious risks of white-collar crime, particularly in the biotech and pharmaceutical industries, where public trust is crucial for health and safety. The convictions also serve as a warning that executives who manipulate the market and break the law can face severe punishment.
This case was investigated by multiple law enforcement agencies, including the FBI, the FDA’s Office of Criminal Investigations, and the U.S. Postal Inspection Service. Their combined efforts have brought these fraudsters to justice, showing that even powerful CEOs of companies like CytoDyn are not above the law.
