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Friends in High Places Don’t Protect Insider Traders

December 10, 2019

by Howard Haykin



Christopher Collins, 69, seemed to have it all.  A 4-term Republican congressman from upstate New York, Collins was ranked as one of the wealthiest members of Congress, and was the first sitting member of Congress to endorse Donald Trump for president. Collins and his wife, Mary, have 3 children and 3 grandchildren; his son Cameron is engaged to be married to the daughter of Stephen Zarsky.
Collins, who had significant business experience prior to entering politics, also owned nearly 17% of an Australian biotechnology firm, Innate Immunotherapeutics, and he served on its board of directors. So confident was Collins about his investment in the company that he hawked it to his children, his congressional staffers and other members of Congress. At least 5 Republican lawmakers bought shares in the company.



AND THEN HIS WORLD CAME CRASHING DOWN.    In June 2017, Christopher Collins received a call informing him that Innate’s new multiple sclerosis drug had failed its clinical trial, which he knew would have a devastating effect on the price of Innate shares. Collins immediately called his son, Cameron, and advised him to sell his shares before the test results became public. Cameron then tipped others, including his future father-in-law, Stephen Zarsky, to do the same. All told, Cameron Collins and Stephen Zarsky together sold nearly 1.7 million Innate shares in advance of Innate’s public announcement of the negative results, thereby avoiding combined losses of more than $700,000.



THREE PLEAD GUILTY TO INSIDER TRADING.    The SEC website headline read: Former Congressman and Two Others Settle Insider Trading Charges.


Insider trading is the trading of a public company's stock or other securities (such as bonds or stock options) based on material nonpublic information about the company. Insider trading is a white-collar crime that is often prosecuted as a felony and punishment often includes jail time, steep fines and disgorgement of profits or losses.


Under terms of the settlement with the Securities and Exchange Commission, Former U.S. Rep. Christopher Collins agreed to be permanently barred from acting as an officer or director of any public company. Cameron Collins, and Cameron’s future father-in-law, Stephen Zarsky, agreed to pay back the losses they had avoided in the insider trading scheme plus interest - approximately $800,000.


Since each of the 3 defendants has pleaded guilty to related criminal charges, they will each next appear before a federal judge for prison sentences. Christopher Collins is scheduled for sentencing on January 17, 2020, at which time he's likely to get a prison sentence of between 4 and 5 years.


It’s not clear if, or to what extent, any others - including friends, family members and government employees - will be charged in this insider trading case.



WARNING: TRADING ON MATERIAL INSIDER INFORMATION WILL BE DETECTED.    With today’s technologies, the SEC has 'its finger on the pulse' of the financial markets, with programs capable of identifying and detecting large and unusual trading patterns – particularly for stocks and options that are impacted by sensitive news announcements. Attempts to trade without detection is, for all intents and purposes, an exercise in futility – even by people with FRIENDS IN HIGH PLACES.



[For further details, click on SEC Complaint 2018-151.]

[For further details on Christopher Collins's guilty plea, click on NYTimes 10/1/19.]