NEW JERSEY – U.S. Attorney Philip R. Sellinger revealed that a former executive of a publicly traded pharmaceutical business was indicted on several securities fraud counts stemming from an alleged $38 million insider trading scam. Dale Chappell, 54, “a former United States citizen and current resident of Switzerland,” was arrested in Switzerland on December 20, 2024, and faces extradition to the District of New Jersey for trial.
Who, What, When, and Why
According to court documents and statements made in court:
“Between June and August of 2021, Chappell avoided more than $38 million in losses by selling millions of shares of Humanigen stock while in possession of material, nonpublic information about Humanigen’s application to the Food and Drug Administration (FDA) for approval a drug to treat COVID-19 called Lenzilumab. Chappell—who sold the Humanigen shares through funds that he controlled—is alleged to have engaged in an insider trading scheme in which he fraudulently used Rule 10b5-1 trading plans to trade Humanigen stock.”
Chappell, a former Chief Scientific Officer and board member at Humanigen, Inc., has been charged with five charges of securities fraud. Humanigen is a clinical-stage biopharmaceutical business based in both New Jersey and California.
Details of the Allegations
Per the unsealed indictment:
“The indictment alleges that in March 2021, Humanigen announced that it planned to seek emergency-use authorization (EUA) for Lenzilumab. However, between April and May of 2021, FDA staff allegedly informed Humanigen that it was unlikely to meet the criteria for issuance of an EUA. As alleged, knowing that Humanigen had not disclosed this information publicly, Chappell sold the funds’ Humanigen stock, and later also implemented Rule 10b5-1 plans to trade more Humanigen stock holdings. After Humanigen publicly announced that the FDA had declined EUA approval for Lenzilumab, Humanigen’s stock price declined approximately 50%.”
A Rule 10b5-1 trading strategy often provides a defense to insider trading charges for corporate insiders who sell shares without the benefit of secret information. However, the United States Attorney’s Office claims that Chappell “was in possession of material nonpublic information” and “fraudulently used Rule 10b5-1 trading plans” to sell Humanigen shares.
Potential Penalties
Chappell is charged with one count of participating in a securities fraud scheme and four charges of securities fraud for insider trading. If convicted, he faces a maximum sentence of 25 years in jail for securities fraud and 20 years in prison for each insider trading conviction.
Ongoing Investigation and Disclaimer
The investigation was conducted by special agents of the Federal Bureau of Investigation, led by Acting Special Agent in Charge Nelson I. Delgado, according to the US Attorney’s Office.
Assistant U.S. Attorney Katherine M. Romano of the Health Care Fraud Unit in Newark represents the government, as do Trial Attorneys Matthew Reilly and David Austin of the Criminal Division’s Fraud Section.