Dale Chappell, the former Chief Scientific Officer of Humanigen Inc., has been charged with insider trading in a scheme that allegedly allowed him to avoid more than $38 million in losses. The charges were announced by the U.S. Justice Department after an indictment was unsealed on December 23, 2024. Chappell, who was arrested in Switzerland, is accused of selling millions of shares of Humanigen stock while in possession of material non-public information regarding the company's application to the Food and Drug Administration (FDA) for emergency use authorization of its COVID-19 treatment, Lenzilumab.

The indictment alleges that between June and August 2021, Chappell used Rule 10b5-1 trading plans to sell Humanigen shares through funds he controlled. These plans are typically used by corporate insiders to pre-schedule stock trades and can provide a defense against insider trading charges. However, the defense is not applicable if the insider is aware of material non-public information at the time the plan is established. The Justice Department claims that Chappell was aware that the FDA had informed Humanigen that its application for Lenzilumab was unlikely to be approved, information that was not publicly disclosed at the time.

Following the public announcement that the FDA had declined the emergency use authorization for Lenzilumab, Humanigen's stock price reportedly fell by approximately 50%. Chappell faces one count of engaging in a securities fraud scheme and four counts of securities fraud for insider trading. If convicted, he could face up to 25 years in prison for the securities fraud scheme charge and 20 years for each insider trading charge.

The case is part of a broader initiative by the Justice Department's Criminal Division to identify and prosecute abuses of 10b5-1 trading plans. The investigation was conducted by the FBI, with assistance from the Justice Department’s Office of International Affairs in handling Chappell’s extradition. The charges against Chappell are part of a data-driven effort to maintain the integrity of financial markets and hold accountable those who exploit insider information for personal gain.

Humanigen Inc., a biopharmaceutical company with offices in New Jersey and California, has not publicly commented on the charges against its former executive. The case underscores the ongoing efforts by U.S. authorities to crack down on securities fraud and protect market integrity.