The U.S. Department of Justice (DOJ) made an announcement today, revealing that they have unsealed an indictment. The indictment charges a former U.S. citizen with participating in an insider trading scheme. This scheme specifically involved trading the stock of a publicly traded biopharmaceutical company.
Dale Chappell, 54, who previously held the position of chief scientific officer and board member at Humanigen, has been accused by the Department of Justice (DOJ) of participating in a securities fraud scheme. The charges against Chappell include one count of engaging in the scheme and four counts of securities fraud specifically related to insider trading.
According to the department, Chappell managed to dodge losses of over $38 million by selling millions of shares of Humanigen stock between June and August 2021.
Chappell had access to confidential information regarding Humanigen’s application to the FDA for emergency use authorization (EUA) of Lenzilumab, a drug designed to treat COVID-19, as confirmed by the DOJ.
According to the Department, in March 2021, Humanigen made an announcement about its intentions to seek Emergency Use Authorization (EUA) for Lenzilumab.
According to the DOJ, Humanigen was reportedly informed by the FDA between April and May 2021 that it was unlikely to meet the criteria for EUA approval.
According to the Department of Justice, Chappell sold Humanigen stock and later utilized Rule 10b5-1 trading plans to sell additional stock holdings. It is important to note that this information was not publicly available.
The Department of Justice (DOJ) clarified the concept of a Rule 10b5-1 trading plan. This plan enables corporate insiders of publicly traded companies to set up predetermined trades, which can serve as a legal defense against insider trading allegations in specific situations.
Humanigen’s stock price dropped by around 50% after the FDA declined EUA approval for Lenzilumab, according to the company’s statement.
According to the Department of Justice, Chappell could potentially be sentenced to up to 25 years in prison for the securities fraud scheme charge. Additionally, he could face 20 years for each insider trading charge.