Collins, a Republican from NY, served on the board of an Australian biotechnology company called Innate Immunotherapeutics, and was also the company's largest shareholder. When the drug trials failed, the public announcement caused the stock price of Innate to plunge 92 percent. His son, Cameron Collins, also faces insider trading charges.
Cameron, in turn, urged others - including his fiancee, her father, Stephen Zarsky, and his wife, and friends - to also dump their stocks before the news went public.
A federal grand jury accused the Buffalo-area lawmaker of passing nonpublic information about a biotech company to his son, who traded on the information and passed it along to others.
Collins, who represents the suburbs of Buffalo and rural counties in upstate NY, became the first House Republican to endorse Donald Trump's bid for the Republican presidential nomination.
"Access to this kind of information carries with it significant responsibility, especially those in society who hold a position of trust", said William Sweeney, assistant director of the FBI New York field office. Lawyers for Cameron Collins could not immediately be reached.More news: Russia tasks Hollywood actor with improving US ties
"They could only sell those shares by virtue of the initial tip of inside information by Congressman Collins".
"Congressman Collins cheated our markets and our justice system", said Geoff Berman, the interim U.S. Attorney for the Southern District of NY.
Collins, who has previously come under fire for investing in Innate while sitting on a House committee that oversees health-care policy, isn't accused of selling shares based on the negative drug trial.
There's no indication that Collins's legal troubles have any connection to the special counsel investigation into Russian election meddling, the Trump campaign and Russia.
Collins bought another $1 million in Innate stock four months before that bill was signed into law, congressional financial disclosure records showed. "Makes no sense. How are these results even possible???"
The Office of Congressional Ethics and the House Ethics Committee launched an investigation into Collins' stake in Innate as a potential conflict of interest.
Collins, 68, was the first member of Congress to endorse President Donald Trump, saying in February 2016, "We need a chief executive, not a chief politician".