Republican Congressman Chris Collins has been charged with securities fraud. The case relates to a failed multiple sclerosis trial that precipitated a 92% drop in the stock price of Australian biotech Innate Immunotherapeutics.
Collins was a member of Innate’s board of directors and held a 17% stake in the biotech. According to prosecutors, Collins learned from Innate’s CEO trial had failed on June 22. Collins replied, “Wow. Makes no sense. How are these results even possible???” before calling his son, Cameron. Prosecutors think Collins told his son about the trial failure, leading to a series of stock sales that enabled Cameron to avoid losses of $570,900 when the news became public.
The information also allegedly spread beyond Cameron. The indictment accuses Cameron of passing news of the trial failure on to four people, one of whom informed three more people. Equipped with this insider knowledge, the group allegedly made trades that saved them almost $200,000 in losses.
Throughout most of this period, Innate’s stock was halted in Australia. However, the stock continued to trade on the U.S. OTC market. All of the Republican congressman’s shares were held in Australia and as such were subject to the halt. Collins is not accused of making trades himself and owned the stock when news of the trial failure wiped millions of dollars off the value of his stake.
Collins surrendered himself to FBI agents and vowed to mount “a vigorous defense in court” against charges he thinks are “meritless.” If convicted on all counts, Collins could be hit with a 150-year prison sentence, according to CNN.
The indictment is part of a larger scandal that has engulfed Collins. The Office of Congressional Ethics published a report (PDF) last year that discussed allegations about Collins’ behavior. The report stated Collins may have shared nonpublic material about Innate, purchased discounted stock offered to him because of his position in Congress and told an NIH employee to meet with the biotech.