On June 22, 2017, Representative Chris Collins was on the South Lawn of the White House for the Congressional Picnic. He received an email from the head of Innate Immunotherapeutics, an Australian biopharmaceutical company in which Collins had a major stake. The email stated that Innate’s experimental multiple sclerosis drug—its only product—had failed a crucial scientific study.
Collins immediately called his son, Cameron, in apparent panic. Collins finally reached his son on the seventh attempt, and they conversed for several minutes. The following day, Cameron began selling their shares of Innate. Cameron also told his fiancée’s father, Stephen Zarsky, about the negative trial, who also told additional people. On June 27, Innate’s shares plummeted 92 percent to 5 cents per share when the company made its clinical trial findings public.
On August 8, 2018, the US Attorney’s office in Manhattan announced that it had indicted Chris Collins, Cameron Collins, and Stephen Zarsky for insider trading and lying to federal agents. According to federal prosecutors, Cameron and Zarsky’s total trades amounted to over $768,000 in losses. Collins denied breaking any laws and stated that he looked “forward to being fully vindicated and exonerated.”
1. Do you think Collins violated federal securities law? Why or why not?
2. Do you think Cameron and Zarsky violated federal securities law? Why or why not?