Former New Jersey Pharma Executive Indicted in Alleged $38 Million Insider Trading Scheme

Prosecutors claim defendant sold shares while possessing material nonpublic information on COVID-19 drug approval

NEW JERSEY - U.S. Attorney Philip R. Sellinger announced that a former executive of a publicly traded pharmaceutical company was indicted on multiple securities fraud counts related to an alleged insider trading scheme worth $38 million. The defendant, identified as Dale Chappell, 54, “a former United States citizen and current resident of Switzerland,” was taken into custody in Switzerland on December 20, 2024, and faces extradition to stand trial in the District of New Jersey.

Who, What, When, and Why

According to court documents and statements made in court:

“Between June and August of 2021, Chappell avoided more than $38 million in losses by selling millions of shares of Humanigen stock while in possession of material, nonpublic information about Humanigen’s application to the Food and Drug Administration (FDA) for approval a drug to treat COVID-19 called Lenzilumab. Chappell—who sold the Humanigen shares through funds that he controlled—is alleged to have engaged in an insider trading scheme in which he fraudulently used Rule 10b5-1 trading plans to trade Humanigen stock.”

Chappell, formerly the Chief Scientific Officer and a board member at Humanigen, Inc., is charged with five counts of securities fraud. Humanigen is a clinical-stage biopharmaceutical company that operates in both New Jersey and California.

Details of the Allegations

Per the unsealed indictment:

“The indictment alleges that in March 2021, Humanigen announced that it planned to seek emergency-use authorization (EUA) for Lenzilumab. However, between April and May of 2021, FDA staff allegedly informed Humanigen that it was unlikely to meet the criteria for issuance of an EUA. As alleged, knowing that Humanigen had not disclosed this information publicly, Chappell sold the funds’ Humanigen stock, and later also implemented Rule 10b5-1 plans to trade more Humanigen stock holdings. After Humanigen publicly announced that the FDA had declined EUA approval for Lenzilumab, Humanigen’s stock price declined approximately 50%.”

A Rule 10b5-1 trading plan typically offers corporate insiders a defense to insider trading charges if shares are sold without the benefit of undisclosed information. However, the U.S. Attorney’s Office alleges that Chappell “was in possession of material nonpublic information” and “fraudulently used Rule 10b5-1 trading plans” to offload Humanigen stock.

Potential Penalties

Chappell is charged with one count of engaging in a securities fraud scheme and four counts of securities fraud for insider trading. If convicted, he faces a maximum penalty of 25 years in prison on the securities fraud charge and 20 years in prison on each of the insider-trading charges.

Ongoing Investigation and Disclaimer

The U.S. Attorney’s Office credits “special agents of the Federal Bureau of Investigation, under the direction of Acting Special Agent in Charge Nelson I. Delgado,” for carrying out the investigation. 

The government is represented by Assistant U.S. Attorney Katherine M. Romano of the Health Care Fraud Unit in Newark and Trial Attorneys Matthew Reilly and David Austin of the Criminal Division’s Fraud Section.

Authorities note that “The charges and allegations contained in the indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.”

The United States intends to seek extradition to bring Chappell to New Jersey to face trial.