Terren S. Peizer, 65, is the founder and former CEO of Ontrak, Inc., a Santa Monica-based healthcare company that used data analytics to identify and engage health plan members with chronic conditions and comorbid behavioral health issues. Peizer co-founded Ontrak in 2003, took it public on NASDAQ under the ticker OTRK, and built it into a company that depended heavily on a small number of health plan customers to generate the majority of its revenue. By early 2021, a single unnamed customer represented more than half of Ontrak’s total revenue. In May 2021, Peizer learned that the relationship with this customer was tenuous. Rather than disclosing what he knew, he established a Rule 10b5-1 trading plan in the name of Acuitas Group Holdings, LLC, his personal investment vehicle, through which he sold approximately 590,000 shares of Ontrak stock worth more than $19.2 million. He attested at the time he was unaware of any material nonpublic information. In August 2021, he learned the same customer relationship was on the verge of termination, adopted a second 10b5-1 plan, and sold 45,000 more shares worth more than $1.9 million. On August 19, 2021, Ontrak disclosed the customer had terminated its contract. The stock fell more than 44%. Peizer had avoided more than $12.7 million in losses. A federal jury in Los Angeles convicted him in 2024 on two counts of insider trading and one count of securities fraud. He was sentenced to 42 months in federal prison in 2025. President Trump pardoned him in January 2026. On August 7, 2026, the SEC dismissed its parallel civil enforcement action against Peizer and Acuitas with prejudice.
The case was described as groundbreaking when charges were first filed in March 2023, because it was the first criminal insider trading prosecution involving the alleged misuse of a Rule 10b5-1 trading plan. These prearranged stock-sale programs are specifically designed to allow corporate executives to schedule securities transactions in advance and reduce the appearance that trades were based on confidential information. The government’s theory was that Peizer had poisoned the well by establishing the plans while already in possession of material nonpublic information, making the plans themselves instruments of insider trading rather than safe harbors from it. The jury agreed in 2024. The pardon erased the criminal consequences. The SEC’s August 7 dismissal, filed as a joint stipulation and characterized as an exercise of the commission’s discretion that “does not necessarily reflect the Commission’s position on any other case,” erased the civil ones.
The Rule 10b5-1 Safe Harbor, the Contamination Theory, and Why the Case Was Groundbreaking
Rule 10b5-1 was adopted by the SEC in 2000 to provide a safe harbor for corporate insiders who wanted to sell shares on a preplanned basis without running afoul of insider trading prohibitions. The rule allows executives to establish written plans specifying the amount, price, and timing of future sales, provided the plan is adopted when the executive is not aware of material nonpublic information. If the plan meets those requirements, trades made pursuant to it are generally protected even if the executive later acquires inside information. The government’s theory in the Peizer case was that the “provided” clause was the critical issue: Peizer established both plans while already knowing that Ontrak’s most important customer relationship was at risk, meaning the plans were contaminated from inception and could not qualify for the safe harbor’s protections. This contamination theory had never been tested in a criminal case before the Peizer prosecution. The Bloomberg Law report on the SEC dismissal noted the commission was walking away from its “novel” case, language that acknowledged the theoretical significance of what was now being abandoned.
Convicted in 2024, Sentenced to 42 Months in 2025, Pardoned in January 2026
The criminal timeline moved slowly but conclusively. The DOJ filed criminal charges in March 2023 in parallel with the SEC civil complaint. After extensive pretrial litigation over the contamination theory’s legal validity, the case went to trial in 2024. The jury in the Central District of California convicted Peizer on two counts of insider trading and one count of securities fraud. U.S. District Judge Otis Wright sentenced him to 42 months in federal prison in 2025. Before he reported to prison, President Trump issued Peizer a pardon in January 2026. The pardon cleared all criminal consequences of the conviction. Ontrak’s stock, which had been trading at over $60 per share when Peizer began selling in May 2021, fell to approximately $10 by the time the customer termination was announced in August 2021. Retail investors who held through the announcement absorbed the losses that Peizer’s trading plans were designed to avoid. The pardon did not address their losses. The SEC civil dismissal does not compensate them either.
The SEC’s Dismissal Language, What It Says About the Commission Under Current Leadership
The joint stipulation filed August 7, 2026, is careful to state that the SEC’s decision to seek dismissal is “in the exercise of its discretion” and “does not necessarily reflect the Commission’s position on any other case.” This boilerplate is standard in voluntary dismissals but carries additional weight here given the broader context: the SEC under its current leadership has dismissed or settled several high-profile enforcement actions at terms favorable to defendants during 2025 and 2026. The Peizer dismissal follows a pattern of the commission stepping back from cases involving parties who have received presidential pardons or who have political connections that the current administration has signaled are relevant to enforcement priorities. The Reuters report on the dismissal noted that the SEC provided no specific reason for dropping the action beyond the discretionary language in the stipulation. Law360 described it as the SEC “walking away” from a novel case that it had previously characterized as groundbreaking.
Ontrak After Peizer, and a Landmark Case That Will Not Produce a Precedent
The practical consequence of the Peizer pardon and the SEC dismissal extends beyond one executive’s freedom. The contamination theory of 10b5-1 liability, specifically that a plan established while the executive possesses material nonpublic information cannot qualify for the safe harbor regardless of how it is structured, now has a jury verdict supporting it but no appellate precedent validating it, because the criminal case ended in a pardon rather than an appeal. The SEC’s civil case, which could have produced a court finding on the same legal question, has been dismissed. Future corporate executives who want to test the contamination theory’s outer limits have a roadmap: establish a plan, face a conviction, seek a pardon. The legal question the prosecution was designed to answer remains formally unresolved. Ontrak, now renamed Acuitas Health, continues to operate. Peizer returned to the company as CEO after his pardon. The customer whose departure triggered the entire sequence of events was never publicly identified.
Conclusion
Terren Peizer used prearranged trading plans to sell $21 million of Ontrak stock while knowing his company’s most important customer was about to leave. A jury convicted him. A judge sentenced him to 42 months. A president pardoned him. The SEC dropped its civil case. The retail investors who held Ontrak through a 44% single-day drop received nothing from any of these proceedings. The rule 10b5-1 contamination theory that made this case groundbreaking has a jury verdict behind it and no appellate court has reviewed it, because the case never reached that stage. The SEC’s note that the dismissal does not reflect its position on any other case is technically accurate. It is also the only thing the commission chose to say about walking away from the first criminal prosecution it ever brought on this theory.
