In a case that sends a strong message to corporate insiders, the former CEO and chairman of the health tech company Ontrak Inc. has been sentenced to over three years behind bars.
Terren Scott Peizer, 65, tried to beat the stock market using insider knowledge—and now, he’s paying the price.
Using Loopholes to Dodge a Financial Hit
Peizer, who split his time between Puerto Rico and Santa Monica, was found guilty of insider trading after he dumped millions in company stock before bad news hit the public.
He did this using something known as Rule 10b5-1 trading plans—a legal tool meant to allow company insiders to sell shares without violating securities laws.
But Peizer twisted it to his advantage.
In May and August of 2021, he created two such trading plans—right after learning that Ontrak’s most important customer was preparing to walk away.
Despite receiving internal warnings from executives, lawyers, and brokers, he skipped the usual “cooling-off” period.
That’s the grace window between creating a plan and actually selling shares, designed to prevent manipulation. Peizer started selling stock the very next day.
Millions Lost—But Not for Him
By acting fast and selling early, Peizer avoided over $12.5 million in losses.
Just days after his last plan was enacted, Ontrak made it official: the major client had terminated the contract.
When that news went public, the company’s stock plummeted over 44%—but Peizer had already cashed out.
His calculated actions didn’t go unnoticed.
In June 2024, after a 10-day jury trial, he was convicted on three felony counts: one for securities fraud and two for insider trading.
Serious Penalties Handed Down
On Monday, a federal judge in Los Angeles sentenced Peizer to 42 months in prison, ordered him to forfeit more than $12.7 million, and slapped him with a $5.25 million fine.
Judge Dale S. Fischer didn’t hold back in her ruling.
Federal officials were equally direct. “Peizer betrayed the trust of investors,” said Matthew R. Galeotti, who heads the Justice Department’s Criminal Division.
“This sentence shows our commitment to taking down those who cheat the system.”
U.S. Attorney Bill Essayli also added, “Insiders can’t be allowed to tip the scales in their favor—if they do, prison is where they’ll end up.”
Targeting Abuses of the System
This case isn’t just about one executive. It’s part of a broader initiative by the Justice Department’s Fraud Section to crack down on executives who misuse 10b5-1 trading plans.
The data-driven program looks for patterns in how company insiders may be bending or outright breaking the rules.
The FBI led the investigation, with support from the Financial Industry Regulatory Authority (FINRA).
Trial Attorney Matthew Reilly, along with prosecutors from the Central District of California, handled the case, including Assistant U.S. Attorney Jonathan Galatzan, who led the forfeiture efforts.
What Comes Next?
As the Peizer case wraps up, the Justice Department is making it clear: this is far from over.
Expect more scrutiny, more enforcement, and more indictments if other executives try to game the system in similar ways.
The message is loud and clear—if you’re holding the cards, don’t try to stack the deck.