By Kanishka Singh
WASHINGTON (Reuters) – An indictment unsealed on Monday charged the former chief scientific officer of biopharmaceutical company Humanigen with engaging in an insider trading scheme involving the firm’s stock, the U.S. Justice Department said.
Between June and August of 2021, Dale Chappell, 54, avoided more than $38 million in losses by selling millions of shares of Humanigen stock while in possession of material non-public information about Humanigen’s application to the Food and Drug Administration for approval of a drug to treat COVID-19 called Lenzilumab, the Justice Department said.
Chappell sold the Humanigen shares through funds he controlled and is alleged to have engaged in an insider trading scheme, according to the Justice Department.
He is a former U.S. citizen and current resident of Switzerland, the Justice Department said in a statement, adding the U.S. was going to seek his extradition.
In March 2021, Humanigen announced it planned to seek emergency-use authorization (EUA) for Lenzilumab.
However, between April and May of 2021, FDA staff allegedly informed Humanigen it was unlikely to meet the criteria for issuance of an EUA, the Justice Department said. Knowing that Humanigen had not disclosed this information publicly, Chappell sold the funds’ Humanigen stock, the department added.
After Humanigen made public that the FDA declined EUA approval for Lenzilumab, the company’s stock price reduced by about 50%, the Justice Department said.
Chappell, who could not immediately be contacted, is charged with one count of engaging in a securities fraud scheme and four counts of securities fraud for insider trading.
If convicted, he faces a maximum penalty of 25 years in prison on the securities fraud charge and 20 years in prison on each of the insider trading charges.
(Reporting by Kanishka Singh in Washington; Editing by Chris Reese)
