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Congressman caught in biotech trading scandal resigns, expected to plead guilty

Rep. Chris Collins, R-N.Y., has submitted his resignation from the U.S. House of Representatives a day before he was expected to plead guilty to insider trading charges involving a small Australian biotech.

"We are in receipt of a letter of resignation," Drew Hammill, a spokesman for House Speaker Nancy Pelosi, D-Calif., told S&P Global Market Intelligence on Sept. 30.

SNL ImageRep. Chris Collins
Source: AP Photo

Hammill said Collins' resignation would be effective on Oct. 1, the same day the congressman is expected to change his plea to guilty at the U.S. District Court for the Southern District of New York in Manhattan.

In August 2018, Collins was accused of tipping off his son Cameron to insider information about the failure of a study for a multiple sclerosis drug being developed by Innate Immunotherapeutics Ltd., which changed its name in 2018 to Amplia Therapeutics Ltd.

Stephen Zarsky, the father of the younger Collins' fiancée, was also part of the alleged scheme.

All three men had initially pleaded not guilty to the charges.

Cameron Collins' fiancée, Lauren Zarsky, a certified public accountant, settled her charges of trading on material, nonpublic information with the U.S. Securities and Exchange Commission and agreed to the disgorgement of her ill-gotten stock winnings of $19,440, plus prejudgment interest of $839 and to pay a civil penalty of $19,440. She also agreed to be suspended from appearing or practicing before the SEC as an accountant for at least five years.

Lauren Zarsky's mother Dorothy also settled charges of trading on material, nonpublic information and agreed to turn over $22,600 she got from the sale of her shares, plus prejudgment interest of $975. She also agreed to pay a civil penalty of $22,600.

Collins narrowly won reelection in November 2018, despite the charges. He had initially said he would not run, but later changed his mind after election officials said it was too late to remove his name from the ballot.

His 2018 Democratic challenger, Nate McMurray, has already said he plans to run for the seat again in 2020. A handful of Republicans have also lined up to challenge McMurray. It will be up to New York Gov. Andrew Cuomo, a Democrat, on how to fill the seat for the remaining term.

The charges

Before his arrest, Collins was on Innate's board and was its largest shareholder. His son and some of his fiancée's family members were also Innate shareholders.

When the New York lawmaker allegedly divulged the confidential information about the study failure to his son, it starting a "tipping chain," in which Cameron's girlfriend and her family members and the other friends were given a forewarning about the secret, nonpublic study results, according to prosecutors at the Southern District of New York.

Cameron Collins and his friends used the inside information they gleaned from the New York lawmaker to trade on the U.S. stock market — selling off their shares before Innate revealed the trial's failure on June 26, 2017, prosecutors said.

After news of the poor study results broke, shares of Innate plummeted 92% the next trading day.

Because they had sold their shares, Cameron Collins and his friends avoided total losses of about $768,600.

U.S. prosecutors and the FBI said the New York congressman first became aware that the Australian biotech's study had failed while he was attending the annual congressional dinner at the White House — the location from which Collins is accused of phoning his son.

Innate acknowledged that its CEO compiled a brief summary of the study's preliminary analysis and emailed the results to the company's board at 8:55 a.m. Australian Eastern Standard Time on June 23, 2017, which was 6:55 p.m. ET the night before in the U.S.

About 15 minutes later, Collins responded to the email, "Wow. Makes no sense. How are these results even possible???" according to the SEC.

The FBI and the SEC clocked the congressman speaking on the phone with his son at about 7:16 p.m. ET on June 22, 2017, after six failed attempts by the elder Collins to reach the younger.

In an Aug. 9, 2018, statement, Innate — now Amplia — said it was cooperating fully with the SEC's requests for information. The company said it considered the ongoing investigation into Collins to be a private matter.