SEC Drops $20M Insider Trading Case After Presidential Pardon

For corporate counsel and compliance officers, the SEC's decision to abandon its civil suit against Terren Peizer—after a presidential pardon erased his criminal conviction—chips away at foundational enforcement assumptions. The case was the first criminal prosecution for abuse of a 10b5-1 trading plan, but now both criminal and regulatory consequences have evaporated. This outcome tests the boundaries of executive power over securities law and signals potential impunity for well-connected executives.

The U.S. Securities and Exchange Commission's decision to drop a civil insider-trading lawsuit against Terren Peizer—a former healthcare executive who was convicted, sentenced, and then granted a presidential pardon—sends a powerful message about the intersection of executive clemency and securities law enforcement. The case, which involved more than $20 million in stock sales while Peizer was aware of negative nonpublic information about Ontrak's largest customer, had been hailed as a landmark prosecution for targeting the misuse of pre-arranged trading plans under Rule 10b5-1. Now, the SEC's move effectively brings both criminal and regulatory accountability to a close, raising significant questions about fairness, deterrence, and the rule of law.

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The SEC could have sought disgorgement of the $20 million in trading proceeds, a lifetime officer-and-director bar, and a monetary penalty.

Peizer, who founded the behavioral health company Ontrak, sold the shares between May and August 2021 while in possession of material nonpublic information that the company's largest customer was terminating its contract. The Department of Justice charged him in 2023, and the SEC filed a parallel civil suit. Authorities labeled the criminal case as groundbreaking because it was the first to challenge the abuse of a 10b5-1 trading plan—a mechanism designed to allow corporate insiders to trade on a predetermined schedule without facing insider-trading claims, provided the plan was established before they possessed material nonpublic information. Peizer's plan was allegedly created after he already knew about the customer loss, thus voiding the safe harbor. In 2024, a Los Angeles jury convicted him of two counts of insider trading and one count of securities fraud. He was sentenced in 2025 to three and a half years in federal prison.

However, President Donald Trump later pardoned Peizer. Although the precise date of the pardon has not been disclosed, its effect was to nullify the criminal conviction. On August 7, 2026, the SEC filed a motion to dismiss its still-pending civil enforcement action. The SEC's reasoning has not been detailed publicly, but the timing leaves little doubt that the pardon was the catalyst.

This sequence of events has drawn immediate comparisons to Trump's previous pardon of Michael Milken, the "junk bond king" who pleaded guilty to securities fraud in 1990 and served about two years in prison. Trump pardoned Milken in 2020 during his first term. Critics have long argued that such clemency grants for wealthy and well-connected white-collar offenders—especially while the administration simultaneously pursues aggressive fraud claims against undocumented immigrants—expose a deep double standard in the justice system.

For the legal and regulatory community, the Peizer dismissal presents troubling implications. First, it neutralizes the deterrent value of the 10b5-1 prosecution. The case was supposed to signal that executives cannot hide behind trading plans when they trade on inside information. With the criminal conviction wiped away and the civil penalty now abandoned, the message to corporate insiders is that political connections can erase accountability. Second, the SEC's decision to voluntarily drop the civil case—rather than let a court decide whether the pardon affects civil liability—raises concerns about the agency's independence. Civil insider-trading charges under Section 10(b) and Rule 10b-5 can proceed separately from criminal cases; a pardon does not automatically extinguish civil liability, though the burden of proof and available remedies might be affected. The SEC could have sought disgorgement of the $20 million in trading proceeds, a lifetime officer-and-director bar, and a monetary penalty. By opting to dismiss, the agency may be perceived as bowing to political pressure or concluding it is not worth the fight. Either way, the enforcement fabric is weakened.