Capitol Report: Rep. Chris Collins arrested on fraud charges for telling son about failed drug trial

Capitol Report: Rep. Chris Collins arrested on fraud charges for telling son about failed drug trial

Rep. Chris Collins (R-NY) delivers a speech on the second day of the Republican National Convention on July 19, 2016 at the Quicken Loans Arena in Cleveland, Ohio.

New York Rep. Christopher Collins was arrested on federal charges relating to securities fraud Wednesday, in a case involving an Australian biotech company.

A Securities and Exchange Commission complaint against Collins — the first congressional Republican to endorse President Donald Trump’s bid for the White House — also details charges against his son Cameron and the father of his son’s girlfriend, Stephen Zarsky.

The SEC complaint says that in June 2017, Rep. Collins passed on nonpublic information about Innate Immunotherapeutics’ INNMF, +22.75% IIL, -1.67%  unexpectedly negative drug-trial results to his son. Collins was a board member of the company. The case says that Cameron Collins sold nearly 1.4 million shares based on nonpublic information.

Zarsky also allegedly traded on the insider information. By selling shares before the drug-trial results were announced, Cameron Collins, Stephen Zarsky and those they tipped off avoided losses of about $768,600, the SEC said.

See: Innate Immunotherapeutics stock plummets 92% after midstage clinical trial miss.

Rep. Collins, according to the complaint, got an email from Innate’s chief executive officer about the results while attending an official event on the South Lawn of the White House on June 22, 2017.

Read the SEC’s complaint.

“Wow. Makes no sense. How are these results even possible???” the congressman responded, before calling his son from the same event.

What’s more, it says Collins took steps in the weeks leading up to the trial results to ensure his son’s Innate shares would be “readily tradeable.” At the time, Collins and his son and daughter each owned shares held by an Australian agent that couldn’t be sold in the U.S.

Lawyers for Collins said in a statement that the government “does not allege that Congressman Collins trade a single share of Innate Therapeutics stock.”

That’s true, but the government says the Congressman benefited in other ways. The SEC’s complaint says Rep. Collins got a “personal benefit” from tipping his son, and that the congressman “also knew or recklessly disregarded that Cameron Collins would trade on his tip.”

In a 2016 Supreme Court case, the Court ruled unanimously that “giving a gift of trading information is the same thing as trading by the tipper followed by a gift of the proceeds.”

“We are confident he will be completely vindicated and exonerated,” added lawyers Jonathan Barr and Jonathan New.

Also see: Congressman may have broken law with biotech he held, watchdog says.

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