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Justice News

Department of Justice
U.S. Attorney’s Office
Southern District of New York

FOR IMMEDIATE RELEASE
Thursday, October 3, 2019

Cameron Collins And Stephen Zarsky Plead Guilty To Insider Trading Scheme Involving Former Congressman Christopher Collins

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that CAMERON COLLINS, the son of former United States Congressman Christopher Collins, and STEPHEN ZARSKY, the father of CAMERON COLLINS’s fiancée, pled guilty to participating in a scheme to commit insider trading in the stock of Innate Immunotherapeutics, a biopharmaceutical company for which Christopher Collins served on the board of directors.

U.S. Attorney Geoffrey S. Berman said:  “Insider trading corrupts the integrity of our markets.  The strength of our financial system depends on investors knowing that everyone is playing by the rules.  Today’s guilty pleas reaffirm the commitment of this Office and our law enforcement partners to protecting and defending those values.”

The following facts are based on the allegations contained in the Superseding Indictment and statements made in related court filings and proceedings:

The Insider Trading Scheme

The Scheme

In or about June 2017, Christopher Collins, who, in addition to serving on Innate’s board of directors, was also one of Innate’s largest shareholders, participated in a scheme to commit insider trading.  Specifically, on or about June 22, 2017, Christopher Collins learned that MIS416 – a multiple sclerosis drug that Innate was developing – had failed a critical drug trial that was meant to determine the drug’s clinical efficacy (the “Drug Trial”).  The negative Drug Trial results were highly confidential, and, as an insider who owed duties of trust and confidence to Innate, Christopher Collins was obligated to keep the Drug Trial results secret until Innate publicly released them.  Instead, in breach of those duties, Christopher Collins tipped his son, CAMERON COLLINS, who was also a substantial Innate shareholder, so that CAMERON COLLINS could make timely trades and tip others before Innate publicly released the Drug Trial results.  CAMERON COLLINS traded on the inside information and passed it to the father of his fiancée, STEPHEN ZARSKY, as well as to three individuals not named in the Superseding Indictment (“Individual-1,” “Individual-2,” and “Individual-6”), so that they could utilize the information for the same purpose.  ZARSKY, in turn, traded on the information and used it to tip three more individuals not named in the Superseding Indictment (“Individual-3,” “Individual-4,” and “Individual-5,”) so that they too could engage in timely trades in Innate stock.  All of the trades preceded the public release of the negative Drug Trial results.

In total, these trades allowed CAMERON COLLINS and ZARSKY, and Individual-1 through Individual-6, to avoid over $768,000 in losses that they would have otherwise incurred if they had sold their stock in Innate after the Drug Trial results became public. 

The Drug Trial Results

In or about October 2014, Innate initiated a Phase 2B clinical trial of its primary drug, MIS416.  Successful completion of the Drug Trial was a necessary prerequisite to the commercialization of MIS416.  Because Innate had no other significant products in development, its stock price was tied to the success of MIS416.

The Drug Trial was widely expected to be completed around the summer of 2017.  For example, on or about June 9, 2017, Innate’s chief executive officer (“CEO”) sent various individuals, including Christopher Collins, an email stating that “the delivery date for [the] review and ‘verdict’” of the Drug Trial “will [] occur at COB on US Thursday June 22nd.”  As the summer progressed, individuals within Innate remained optimistic that MIS416’s Drug Trial results would be positive.  The initial Drug Trial results were made available by trial administrators to Innate’s CEO on June 22, 2017.  These results established that MIS416 lacked therapeutic value in the treatment of multiple sclerosis.  The results were not publicly released at that time.  Instead, they were released publicly on June 26, 2017, after the U.S. markets had closed (the “Public Announcement”).  Innate’s stock price subsequently crashed, dropping 92% on the first trading day following the Public Announcement. 

Dissemination of the Drug Trial Results

On or about June 22, 2017, at approximately 6:55 p.m., Innate’s CEO sent an email describing the Drug Trial results to the company’s Board of Directors, including Christopher Collins.  The email explained to Innate’s Board of Directors for the first time that the Drug Trial had been a failure.  The email began, in part, “I have bad news to report,” and continued to explain that “the top line analysis of the ‘intent to treat’ patient population (ie every subject who was successfully enrolled in the study) would pretty clearly indicate[s] ‘clinical failure.’”  The email continued, “Top-line 12-month data . . . show no clinically meaningful or statistically significant differences in [outcomes] between MIS416 and placebo,” and concluded by stating, “No doubt we will want to consider this extremely bad news. . . .” 

At the time Christopher Collins received this email, he was attending the Congressional Picnic at the White House.  At 7:10 p.m., Christopher Collins replied to the email, stating, in part, “Wow.  Makes no sense.  How are these results even possible???”  After responding to the Innate CEO’s email, Christopher Collins called his son, CAMERON COLLINS.  They traded six missed calls between 7:11 p.m. and 7:15 p.m..  At 7:16 p.m., Christopher Collins and CAMERON COLLINS spoke for more than six minutes.  During that six-minute phone call, Christopher Collins told CAMERON COLLINS, in sum and substance, that MIS416 had failed the Drug Trial.

Trading and Tipping by CAMERON COLLINS and ZARSKY

CAMERON COLLINS began placing orders to sell his Innate shares the morning after he received inside information from Christopher Collins.  Between the morning of Friday, June 23, 2017 and the close of the market on Monday, June 26, 2017, CAMERON COLLINS sold approximately 1,391,500 shares of Innate stock.  These sales allowed CAMERON COLLINS to avoid approximately $570,900 in losses. 

Furthermore, after learning the Drug Trial results from Christopher Collins, on or about the night of June 22, 2017, CAMERON COLLINS provided the Drug Trial results to at least the following three sets of individuals so that they could trade in advance of the Public Announcement:  (1) his fiancée, Individual-1; (2) ZARSKY and ZARSKY’s wife, Individual-2; and (3) CAMERON COLLINS’s friend, Individual-6.  Collectively, these individuals avoided approximately $186,620 in losses as a result of their trading on inside information. 

On or about the morning of June 23, 2017, ZARSKY provided the negative Drug Trial results that he had learned from CAMERON COLLINS and Individual-1 to at least the following individuals, among others, or otherwise caused them to trade or attempt to trade in advance of the Public Announcement: (1) his brother, Individual-3; (2) his sister, Individual-4; and (3) his longstanding friend, Individual-5.  Collectively, these individuals avoided approximately $10,900 in losses as a result of their trading on inside information.

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CAMERON COLLINS, 26, and STEPHEN ZARSKY, 67, each pled guilty to one count of conspiracy to commit securities fraud, which carries a maximum penalty of five years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendants will be determined by the Judge. 

Mr. Berman praised the outstanding work of the FBI and thanked the U.S. Securities and Exchange Commission for its assistance.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.  Assistant U.S. Attorneys Scott Hartman, Max Nicholas, and Damian Williams are in charge of the prosecution.  

Topic(s): 
Securities, Commodities, & Investment Fraud
Press Release Number: 
19-319
Updated October 3, 2019