On December 30, 2024, the Securities and Exchange Commission announced that it was charging Cameron Durrant, the CEO of clinical stage biopharmaceutical company Humanigen, Inc., and Dale Chappell, its Chief Scientific Officer, with insider trading for selling Humanigen stock between June and August 2021 while in possession of material nonpublic information.
According to the SEC’s complaint, the two executives sold millions of dollars in Humanigen shares after they obtained MNPI from the Food and Drug Administration that the agency would likely reject the application for Emergency Use Authorization (“EUA”) of its Humanigen’s COVID-19 drug lenzilumab. Based on this MNPI, Durrant allegedly violated federal securities laws when he sold more than 80,000 share of Humanigen stock for more than $1.68 million. The SEC also alleges that Chappell not only sold Humanigen stock based on the MNPI but also directed three investment vehicles under his control – Black Horse Capital LP, Black Horse Master Fund Ltd., and Cheval Holdings, Ltd. – to sell more than 3.8 million shares of Humanigen stock for $68 million, including through Rule 10b5-1 trading plans. In September 2021, when Humanigen publicly announced that the EUA for lenzilumab had been denied, Humanigen’s stock price dropped by approximately 50 percent. According to the SEC, the illicit trading enabled Chappell to avoid more than $38 million in losses, while Durrant allegedly avoided more than $1 million in losses.
In its complaint, which was filed in the U.S. District Court for the District of New Jersey, the SEC charged Durrant, Chappell and the three investment vehicles controlled by Chappell with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The SEC also requested that the court order Durrant and Chappell to pay disgorgement with prejudgment interest and civil monetary penalties, impose permanent injunctions, and issue officer and director bars against each defendant.
On December 23, 2024, the Department of Justice announced that federal prosecutors in New Jersey unsealed an indictment revealing parallel criminal charges filed against Chappell in connection with the improper sale of millions of shares of Humanigen stock, in 2021, through funds that he controlled. Chappell was specifically charged with one count of engaging in a securities fraud scheme and four counts of securities fraud for insider trading. According to the U.S Attorney’s Office for the District of New Jersey, this case is part of an initiative led by the Criminal Division’s Fraud Section that identifies executive abuses of 10b5-1 trading plans using data-analytics tools.
SEC Press Release | SEC’s Second Amended Complaint | DOJ Press Release – December 23, 2024 | USAO for the District of New Jersey Press Release – December 23, 2024 | Unsealed Indictment