Prosecutors: Rep. Chris Collins 'cheated our markets and justice system' with stock tips

Prosecutors: Rep. Chris Collins 'cheated our markets and justice system' with stock tips

Federal law enforcement officials on Wednesday said Rep. Chris CollinsChristopher (Chris) Carl CollinsIndicted GOP lawmaker to stay on ballot in New York this fall: report Live coverage: Cuomo, Nixon face off in high-stakes New York primary Hoyer lays out government reform blueprint MORE (R-N.Y.) “cheated our markets and our justice system” by allegedly helping his family avoid thousands of dollars in losses with insider information.

“Congressman Collins — who by virtue of his office helps to write the laws of our nation — acted as if the law didn't apply to him,” said Geoff Berman, U.S. attorney for the Southern District of New York, at a press conference. “The charges today demonstrate once again that no matter what the crime and no matter who committed it, we stand committed in the pursuit of justice without fear or favor.”

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Collins, one of President TrumpDonald John TrumpTrump: I hope voters pay attention to Dem tactics amid Kavanaugh fight South Korea leader: North Korea agrees to take steps toward denuclearization Graham calls handling of Kavanaugh allegations 'a drive-by shooting' MORE's earliest supporters on Capitol Hill, was charged Wednesday with securities fraud related to his role as a board member of an Australian pharmaceutical company in which he was heavily invested. The congressman allegedly shared nonpublic information with his son, Cameron Collins, that spurred a series of trades based on insider information.

“The crime that [Collins] committed was to tip his son Cameron so that Cameron and a few others could trade on the news while the investing public remained in the dark,” Berman said.

The congressman, Cameron Collins and Stephen Zarsky — the father of Cameron’s fiancée — were charged Wednesday with securities fraud, wire fraud and making false statements to federal officials. 

Chris Collins served as a board member for Innate Immunotherapeutics, a Sydney-based firm that tried to develop a drug to fight advanced multiple sclerosis. He was also Innate’s largest shareholder.

Collins and top company executives expected the drug to pass clinical trials, which would significantly raise the value of the company’s stock. But the test results, received by Innate on June 22, 2017, “pretty clearly indicate[d] clinical failure,” according to an email sent by the company’s CEO that was cited in the indictment.

“Access to this kind of information carries with it significant responsibility, especially those in society who hold a position of trust,” said William Sweeney, assistant director of the FBI's New York field office.

Innate froze the trading of its stock in Australia on June 22, hours before the company shared the test results with top executives and board members, including Collins. The results were publicly announced on June 26.

The congressman’s shares of Innate were held in Australia, preventing him from selling the stock before the announcement sank its value. But Collins advised his son to sell his stock, and Cameron Collins later told Zarsky and six other family members to do the same, according to the indictment.

Chris Collins’s alleged tip helped his son, Zarsky and other relatives avoid about $750,000 in losses they would have suffered without knowledge of Innate’s clinical failure. Collins lost $17 million after the announcement of the negative test results.

“This was the drop that was anticipated by the co-conspirators,” Berman said. “They could only sell those shares by virtue of the initial tip of inside information by Congressman Collins.”

Collins, his son and Zarsky also allegedly lied to FBI agents in April about their trading of Innate stock and their advance knowledge of the test results.

“In the hours and days after learning of the drug trial results, [Collins], his son and their associates exchanged a flurry of calls,” said Steven Peikin, co-director of the Securities and Exchange Commission's (SEC) Enforcement Division. “The investigation yielded a detailed footprint left by the defendants, revealing their frantic efforts to sell shares and warn others before Innate announced bad news.”

The SEC has sought to ban Collins from being a director of a publicly traded company and for his co-defendants to forfeit the money they saved through the sale of Innate stock.

A statement from Collins's attorneys was posted on his House website.

"We will answer the charges filed against Congressman Collins in Court and will mount a vigorous defense to clear his good name," the statement read. "It is notable that even the government does not allege that Congressman Collins traded a single share of Innate Therapeutics stock. We are confident he will be completely vindicated and exonerated."

The attorneys added that Collins "will have more to say on this issue later today."