An indictment has been unsealed charging Dale Chappell, a former executive of Humanigen, Inc., with securities fraud and insider trading. The announcement was made by U.S. Attorney Philip R. Sellinger in Newark, New Jersey.
Chappell, 54, 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 and faces extradition to the United States to stand trial in the District of New Jersey.
Court documents allege that between June and August 2021, Chappell sold millions of shares of Humanigen stock while possessing confidential information about the company's FDA application for Lenzilumab, a COVID-19 treatment drug. This allegedly allowed him to avoid losses exceeding $38 million through funds he controlled.
The indictment details that in March 2021, Humanigen intended to seek emergency-use authorization (EUA) for Lenzilumab. However, FDA staff reportedly informed the company between April and May 2021 that it likely would not meet EUA criteria. Despite this undisclosed information, Chappell is accused of selling stocks from his funds before publicly implementing Rule 10b5-1 plans for further trades. Following an announcement that the FDA declined EUA approval for Lenzilumab, Humanigen's stock value fell by approximately 50%.
"Our office is committed to holding accountable those who profit based on insider information," stated 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 related to engaging in a securities fraud scheme and four counts tied to insider trading activities. Conviction could result in up to 25 years imprisonment for securities fraud and an additional 20 years per insider-trading charge.
This case is part of an initiative by the Criminal Division’s Fraud Section utilizing data analytics tools to identify misuse of Rule 10b5-1 trading plans by executives like Chappell.
U.S. Attorney Sellinger acknowledged contributions from FBI special agents under Acting Special Agent Nelson I. Delgado's leadership during this 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 within this indictment are accusations at present; Dale Chappell retains his presumption of innocence unless proven otherwise.