There are calls for Australian authorities to prosecute a disgraced former US congressman for insider trading while a director of an Australian drug company, amid concerns he may be pardoned by President Donald Trump.

Key points: Trump ally Chris Collins has been sentenced to prison for insider trading involving an Australian drug company

Trump ally Chris Collins has been sentenced to prison for insider trading involving an Australian drug company Australian shareholders and ethics experts want Collins prosecuted in Australia and question whether ASIC dismissed warning signs

Australian shareholders and ethics experts want Collins prosecuted in Australia and question whether ASIC dismissed warning signs There are concerns Mr Trump will pardon Collins

Once a member of Mr Trump's inner circle, former Republican congressman Chris Collins has recently been sentenced to prison in the US for insider trading and lying to the FBI.

A Four Corners investigation reveals investors and ethics experts are now questioning whether Australian regulators dismissed warning signs about Collins, long before he was convicted of insider trading on the lawn of the White House.

Who is Chris Collins?

Collins was the first congressman to endorse Mr Trump for president in 2016 and was given a coveted spot speaking at the Republican National Convention in front of thousands of the party faithful.

That speech gave the largely unknown congressman a "ticket to the big time", according to Michael Caputo, a former Trump adviser.

After Mr Trump won office, Collins, a serial entrepreneur and multi-millionaire, was touted as a possible White House chief of staff or cabinet secretary.

Collins was given a role on Mr Trump's transition team and at a rally in New York in mid-2017, the President declared: "I love him."

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Watch Duration: 31 seconds 31 s Donald Trump praises Chris Collins in 2017.

At the same time, Collins was also a director and the largest shareholder of the Australian biotechnology company Innate Immunotherapeutics.

The company was focused on developing an experimental drug to treat secondary progressive multiple sclerosis.

Collins had poured millions of dollars into the company himself and convinced dozens of his colleagues, neighbours and staff to invest.

"Chris Collins was absolutely obsessed with this company and absolutely obsessed with this drug," Buffalo News Washington bureau chief Jerry Zremski told Four Corners.

"He talked about it all the time," he said.

Chris Collins was an early supporter of Donald Trump's bid for President. ( AP: Evan Vucci )

Company received millions in Australian taxpayer funds

Sydney-based Innate Immunotheraputics launched on the Australian stock exchange in 2013 to raise money to fund a clinical trial.

The company received almost $4.5 million in Australian taxpayer funds through the Government's Research and Development Tax Incentive, to develop the drug and carry out a clinical trial that would determine if the company would succeed or fail.

Investors like Darshak Mehta hoped the company would be able to deliver on its goal to sell the drug to a big pharmaceutical company for billions, providing shareholders with a huge profit.

"From everything that I was able to read from the company, from all the investor websites, it was looking like it was a slam dunk," he said.

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Collins began insider trading on the lawn of the White House

Collins was on the White House lawn at a congressional picnic when he got an email from Innate's chief executive officer that the trial had failed.

Before the news was made public, Collins shared the inside information with his son Cameron, who also held stocks in the company.

Cameron passed that tip onto others and they began selling their Innate shares.

(L-R) President Donald Trump, Chris Collins, Innate investor Gerald A. Buchheit and Melania Trump pictured at the 2017 White House picnic. ( Instagram )

One of his associates sold her shares on the ASX before the company implemented a trading halt in Australia.

Cameron and others continued to sell their shares on the US market, where the trading halt did not apply.

Four days later Innate announced the trial results and the Australian trading halt was lifted.

The share price dropped 92 per cent in a single day.

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By selling their shares before the news was public, Cameron and his associates avoided more than $1 million in losses.

Collins later pleaded guilty to lying to the FBI and insider trading. He is expected to begin his 26-month sentence in a minimum-security prison in Florida next month.

He has been fined $US200,000 and banned from serving as a director of a public company in the US.

Sydney barrister and Innate investor James Wheeldon was "absolutely staggered" by Collins's behaviour.

"I was most staggered by … I guess the sociopathic level of brazenness in procuring insider trading from the White House, and thinking that you would get away with it," he said.

Australian regulators accused of ignoring warning signs

While the MS drug was being developed, Collins made a series of controversial moves that investors and ethics experts said should have been red flags to the Australian Securities and Investments Commission (ASIC).

More than two years before he was convicted for insider trading, US ethics investigators found substantial evidence Collins was sharing non-public company information in emails he had sent to investors to keep them updated on the drug's progress.

They also found evidence Collins likely violated House rules by using his official position to help a company which he had a significant financial stake in.

Collins also failed to lodge his substantial shareholder notice with the ASX on time, a breach Mr Wheeldon said should have been taken seriously by the regulator.

Sydney barrister and Innate investor James Wheeldon is critical of ASIC's handling of the company. ( Four Corners: Mathew Marsic )

"It took Mr Collins nearly 18 months to file his first substantial shareholder notice, when the law requires you to file that notice within two business days so that was a clear violation of a criminal law," he told Four Corners.

US ethics lobbyist Craig Holman said the failure of regulators to pick up on the lack of disclosure showed they were not taking their job seriously.

"They should've been right on this," he told Four Corners.

Mr Wheeldon also raised concerns about Collins and his children owning more than 20 per cent of the company without getting approval, but those concerns were dismissed by ASIC.

Innate's ASX listing has since been taken over by a Melbourne company called Amplia Therapeutics.

It has a new chairman and CEO, has abandoned its MS research and is focused on cancer treatments.

"Based on what I know about the new company, they don't have anything to do with what went on beforehand," Mr Wheeldon said.

"What does concern me though, is that it raises the possibility that ASIC has completely missed the boat in terms of finding out what went on within the company back in June 2017."

Growing calls for charges against Collins in Australia

Since his conviction in the US, there are calls for Australian authorities to take their own action against Collins.

Mr Wheeldon said it was clear from Collins's admissions in the US that he had committed crimes under Australian law.

"Effectively Chris Collins has admitted in the United States to a number of intentional breaches of Australian law: procuring insider trading, breaches of his director's duties … and yet, it doesn't look as if anything's going to be done in Australia in relation to any of that," he said.

"Australia is a sovereign nation … our laws should be enforced, because you want to send the message throughout Australia and around the world, that Australia is not a paradise for white-collar criminals," he said.

Collins will likely serve his sentence in Florida, in a federal prison in for white-collar criminals nicknamed 'Club Fed'. ( AP: Seth Wenig )

Investor Mr Mehta is angry.

He said Australian authorities should take action against Collins and investigate the company, but he doubts they will.

"Australia is just the puppy dogs of the Yanks so I doubt we are going to do that, but we really should be," he said.

Despite Collins's admissions of wrongdoing, ASIC said it considered a number of allegations about the former congressman but "did not identify sufficient evidence to warrant formal investigation".

Mr Holman is concerned about the Australian authorities' apparent lack of action.

He is worried that because of Collins's close relationship to Mr Trump, the President may pardon the former congressman.

"If that's the case, if there's going to be any justice that's going to be levelled in this case … it's going to have to come from Australian authorities," he said.