NEW YORK, Oct 1 (Reuters) - Chris Collins, a former U.S. Congressman from New York state who was known as an early backer of President Donald Trump, pleaded guilty on Wednesday to taking part in an insider trading scheme.
Collins, 69, entered his plea before U.S. District Judge Vernon Broderick in Manhattan the day after he resigned his seat in the U.S. House of Representatives.
He had represented New York’s 27th Congressional District, which includes areas surrounding Buffalo and Rochester in western New York. He narrowly won reelection last November, three months after he was criminally charged.
The criminal case arises from Collins’ role as a board member and 16.8% stakeholder of Australian biotechnology company Innate Immunotherapeutics Ltd.
Prosecutors allege that in June 2017, while attending the congressional picnic at the White House, Collins learned in an email from Innate’s chief executive that the company’s experimental multiple sclerosis drug, MIS416, had failed in a clinical trial.
Collins shared the news about the setback with his son, Cameron Collins, who in turn told his fiancée, Lauren Zarsky; her parents, Dorothy and Stephen Zarsky; and a friend, according to prosecutors. Stephen Zarsky went on to tip off additional unnamed people, the prosecutors said.
Chris Collins did not trade his own Innate stock, which lost millions of dollars in value. Prosecutors said the congressman was “virtually precluded” from trading in part because he already faced a congressional ethics probe over Innate.
However, prosecutors said Cameron Collins and the others used the insider information to avoid a total of more than $768,000 in losses when Innate’s share price plunged 92% after news of the drug’s failure became public.
Cameron Collins, 26, and Stephen Zarsky, 67, have been charged in the case and are scheduled to plead guilty on Thursday, court records show.
Lauren and Dorothy Zarsky were not criminally charged, but agreed to surrender the money they made selling Innate stock to the Securities and Exchange Commission under a civil settlement without admitting wrongdoing. (Reporting By Brendan Pierson in New York Editing by Noeleen Walder and Bill Berkrot)