By: Richard L. Smith
A former executive of a publicly traded biopharmaceutical company has been indicted on charges of securities fraud and insider trading, according to information released by the U.S. Department of Justice.
Dale Chappell, 54, a former U.S. citizen now residing in Switzerland, faces five counts of securities fraud.
Chappell, previously the Chief Scientific Officer and a board member at Humanigen, Inc., was arrested in Switzerland on December 20 in connection with the charges. The U.S. is seeking his extradition to stand trial in New Jersey.
According to the indictment, between June and August 2021, Chappell sold millions of Humanigen shares while possessing confidential information about the company's FDA application for Lenzilumab, a COVID-19 treatment.
The trades, made through funds under his control, allowed Chappell to avoid more than $38 million in losses.
Court documents allege that while Humanigen publicly expressed confidence in securing emergency-use authorization (EUA) for Lenzilumab, internal communications with the FDA indicated approval was unlikely.
Despite this, Chappell continued to trade company stock and used Rule 10b5-1 trading plans to shield his actions.
When Humanigen later announced the FDA had declined EUA approval, the company’s stock price dropped by approximately 50%.
“Our office is committed to holding accountable those who profit based on insider information,” U.S. Attorney Philip R. Sellinger said in a statement. “Combatting securities fraud and protecting the integrity of the markets continues to be a priority for this office.”
Chappell faces up to 25 years in prison for the securities fraud scheme and 20 years for each of the four insider trading charges if convicted. 
The case is part of a broader initiative by the Department of Justice’s Criminal Division to detect and prosecute abuses of 10b5-1 trading plans.
The investigation into Chappell’s trading activity was identified through data analytics tools used by the Fraud Section, according to the Justice Department.