Former Biotech Executive Facing Charges in $38 Million Insider Trading Case
A former Humanigen executive, Dale Chappell, is facing accusations of insider trading, according to the U.S. Department of Justice (DOJ). The DOJ has unsealed an indictment charging Chappell, who was the chief scientific officer and a board member at Humanigen, with engaging in a securities fraud scheme and insider trading.
Between June and August 2021, Chappell allegedly sold millions of shares of Humanigen stock, avoiding over $38 million in losses. During this period, he had access to material nonpublic information regarding Humanigen’s application to the FDA for emergency use authorization (EUA) of Lenzilumab, a drug for treating COVID-19.
In March 2021, Humanigen announced its intention to seek EUA for Lenzilumab. However, in April and May 2021, the FDA informed Humanigen that it was unlikely to meet the criteria for EUA approval. Despite this nonpublic information, Chappell allegedly sold Humanigen stock and implemented Rule 10b5-1 trading plans to sell more stock holdings.
Rule 10b5-1 allows corporate insiders of publicly traded companies to establish pre-planned trades, providing a defense to insider trading charges under certain circumstances. Following the FDA’s decision to decline EUA approval for Lenzilumab, Humanigen’s stock price plummeted by approximately 50%.
Chappell could face a maximum penalty of 25 years in prison for the securities fraud scheme charge and 20 years for each insider trading charge, as per the DOJ. It’s a sobering reminder of the serious consequences of insider trading and the importance of ethical conduct in finance and securities exchange.
