U.S. Congressman Chris Collins of NY Indicted for Insider Trading

By:
Chris Gaetano
Published Date:
Aug 8, 2018
Gavel

U.S. Congressman Chris Collins (R-NY) has been indicted on insider trading charges relating to a biotechnology company, Innate Immunotheraputics Limited, where he is a board member, according to NBC News. Also charged were Cameron Collins, his son, and Stephen Zarsky, the father of Cameron Collins' fiancée. 

The charges relate to a drug trial of the firm's primary product, MIS416, which is intended to treat Secondary Progressive Multiple Sclerosis (SPMS). There was much at stake regarding this test, as the company had no other significant products in development, and so its stock price was tied directly to whether the drug succeeded. Since there are few alternative treatments for SPMS, the medication had the potential to be extremely lucrative if cleared for the market. While the company had anticipated positive results from the trial, which had been ongoing since 2014, by the summer of 2017 it was found that MIS416 did not show clinically meaningful or statistically significant differences in the measure of neuromuscular function or patient reported outcomes. Essentially, the trial had failed. 

On the night of June 22, Innate requested a halt in trading on exchanges in Australia, where the company is based, but, critically, not in the U.S. over-the-counter market. The halt was scheduled to last five days. On the day before the halt ended, the company put out a press release publicly stating that the drug on which the company had pinned all its hopes had failed. The company's stock plummeted, losing 92 percent of its value in just two days. 

Before this all happened, though, Rep. Collins contacted his son and told him that the drug trial was a failure, which the government charges was "in breach of his duties to Innate" and done "anticipating that Cameron Collins would use it to trade and tip others." Rep. Collins couldn't trade himself, as both his position on the board and the Australian halt prevented him from doing so. But his son, whose stock in the company was held in U.S. exchanges, could. Responding to the news from his father, Cameron Collins sold 1,391,500 shares of Innate stock between June 23 and June 26, when the drug trials became public. This allowed him to avoid about $570,000 in losses. During this time ,he also passed on the information to the other defendants, who made similar moves to avoid loss. 

(Because Rep. Collins himself could not trade, the complaint said that he wound up losing millions following the stock's crash.) 

The complaint charges that Rep. Collins then took active measures to prevent people from learning that his son had sold significant portions of his Innate stock before the public announcement. He issued statements to a local reporter outright saying that his son liquidated all his shares after the halt was lifted and had suffered substantial financial loss, shaping the statement to give the impression that he had not sold shares prior to the announcement. An email written by Rep. Collins explicitly said "We want this to go away," referring to all the press coverage surrounding Innate. 

The defendants are charged with conspiracy to commit securities fraud, conspiracy to commit wire fraud, wire fraud, six counts of securities fraud, and three counts of making false statements. 

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