SEC Dismisses Insider Trading Case Against Former Ontrak CEO Terren Peizer
The U.S. Securities and Exchange Commission (SEC) has officially moved to dismiss its civil insider trading lawsuit against Terren Peizer, the founder and former chief executive officer of the healthcare company Ontrak. This development follows a highly publicized presidential pardon granted by Donald Trump in January, which effectively nullified Peizer’s prior criminal convictions for insider trading and securities fraud.
A Groundbreaking Case: Abuse of 10b5-1 Trading Plans
The legal saga surrounding Terren Peizer was widely considered a landmark moment in financial regulation. In 2023, the Department of Justice (DOJ) alongside the SEC brought parallel criminal and civil charges against Peizer. It marked the very first criminal prosecution involving the alleged abuse of a pre-arranged stock-selling program, commonly known as a Rule 10b5-1 trading plan.
These plans are designed to shield corporate insiders from insider trading liabilities by allowing them to schedule stock sales in advance. However, authorities alleged that Peizer manipulated this safe harbor. Between May and August 2021, Peizer sold more than $20 million worth of Ontrak stock. Prosecutors successfully argued that he established these trading plans while in possession of material non-public negative information—specifically, the imminent loss of Ontrak’s largest customer.
Conviction and Sentencing
In 2024, a federal jury in Los Angeles found Peizer guilty of two counts of insider trading and one count of securities fraud. The conviction was seen as a strong warning to corporate executives regarding the misuse of executive trading plans. Subsequently, in 2025, a federal judge sentenced Peizer to 3.5 years in prison, emphasizing the severity of the financial fraud.
The Presidential Pardon and Its Aftermath
The trajectory of the case shifted dramatically when President Donald Trump granted Peizer a presidential pardon in January of this year. While a presidential pardon clears federal criminal convictions, the SEC operates as a civil regulatory body. Historically, the SEC can still pursue civil penalties, such as disgorgement of ill-gotten gains and director and officer (D&O) bans. However, the agency’s recent motion to drop the civil suit entirely highlights the profound impact the pardon has had on the broader enforcement strategy.
The Michael Milken Connection
Adding another layer of historical financial context, Terren Peizer is known as a former protege of Michael Milken, the financier famously dubbed Wall Street’s “junk bond king” in the 1980s. Interestingly, Milken himself—who pleaded guilty to securities fraud and served approximately two years in prison—was also pardoned by Trump during his first presidential term in 2020. Critics and legal advocates have scrutinized these pardons, contrasting them with the administration’s stringent legal approaches to other fraud claims, notably in immigration contexts in Minnesota earlier this year.
Frequently Asked Questions (FAQ)
- What is insider trading and how does a 10b5-1 trading plan work?
Insider trading involves buying or selling a security while in possession of material, non-public information about it. A 10b5-1 plan allows major shareholders and executives to pre-schedule trades to avoid accusations of insider trading, provided they do not possess inside information when the plan is created. - Who is Terren Peizer and what was his role at Ontrak?
Terren Peizer is a financier and the founder of Ontrak, a behavioral healthcare company. He served as its CEO and chairman before stepping down amid the DOJ and SEC investigations into his trading activities. - Can the SEC pursue civil charges after a presidential pardon?
Yes, a presidential pardon applies specifically to federal criminal offenses. The SEC, as a civil agency, theoretically retains the authority to pursue civil penalties and bans. However, in Peizer’s case, the SEC opted to dismiss the parallel civil lawsuit following the presidential pardon.
