U.S. Attorney Philip R. Sellinger | U.S. Department of Justice
An indictment has been unsealed charging Dale Chappell, a former executive of Humanigen, Inc., with securities fraud and insider trading. U.S. Attorney Philip R. Sellinger announced the charges in Newark, New Jersey.
Chappell, 54, who is currently residing in Switzerland and was formerly a United States citizen, faces five counts of securities fraud. He previously served as the Chief Scientific Officer and a member of the Board of Directors at Humanigen, a biopharmaceutical company with operations in New Jersey and California. He was arrested on December 20 in Switzerland based on these U.S. criminal charges. The United States plans to seek his extradition for trial in New Jersey.
Court documents reveal that between June and August 2021, Chappell allegedly avoided over $38 million in losses by selling millions of shares of Humanigen stock while possessing confidential information about the company's application to the Food and Drug Administration (FDA) for Lenzilumab, a drug intended to treat COVID-19. It is alleged that he engaged in an insider trading scheme using Rule 10b5-1 trading plans to conduct these trades.
The indictment claims that Humanigen announced its intention to seek emergency-use authorization (EUA) for Lenzilumab in March 2021. However, FDA staff reportedly informed Humanigen between April and May 2021 that it likely would not meet EUA criteria. Despite this nonpublic information, Chappell allegedly sold shares through funds he controlled and later used Rule 10b5-1 plans to sell more stock holdings before the public announcement that FDA had declined EUA approval caused Humanigen's stock price to drop by about 50%.
“Our office is committed to holding accountable those who profit based on insider information,” said U.S. Attorney Sellinger. “Combatting securities fraud and protecting the integrity of the markets continues to be a priority for this office.”
Chappell faces one count of engaging in a securities fraud scheme and four counts related to insider trading if convicted. The maximum penalty could be up to 25 years for securities fraud and 20 years for each insider-trading charge.
This case is part of an initiative led by the Criminal Division’s Fraud Section aimed at identifying executive abuses of Rule 10b5-1 trading plans using data analytics tools.
U.S. Attorney Sellinger credited special agents from the Federal Bureau of Investigation under Acting Special Agent Nelson I. Delgado's direction with conducting the investigation.
Assistant U.S. Attorney Katherine M. Romano from Newark's Health Care Fraud Unit along with Trial Attorneys Matthew Reilly and David Austin from the Criminal Division’s Fraud Section are representing the government.
It should be noted that all charges contained within this indictment are accusations at this stage; Chappell remains presumed innocent until proven guilty.
