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A former chief executive officer in Silicon Valley orchestrated a more than $2 million insider trading scheme to help his family profit on nonpublic information about his fiber optics company, the SEC said Sept. 20 ( SEC v. Chang , N.D. Cal., No. 5:17-cv-05438, 9/20/17 ).
Peter Chang, the founder and onetime CEO of Alliance Fiber Optic Products Inc., used brokerage accounts in the names of his wife and brother to make illicit trades, sometimes at the company’s headquarters in Sunnyvale, Calif., according to a Securities and Exchange Commission complaint filed in the U.S. District Court for the Northern District of California. The brother, who lives in Taiwan, also traded on inside information he received from Chang, the agency said.
The trading preceded two negative earnings announcements in 2015 and the company’s acquisition by Corning Inc. in 2016, according to the commission. Chang left Alliance when Corning acquired it and made more than $30 million in legitimate gains through the merger, the SEC said.
The agency is looking for Chang to pay civil penalties and return the ill-gotten trading profits with interest, according to the complaint. The commission also is seeking to bar him from acting as an officer or director of a public company.
He is facing criminal charges in federal court in California, as well, according to the SEC.
“Chang’s insider trading scheme was brazen,” the complaint said.
Information on a lawyer for Chang wasn’t immediately available.
At Alliance, Chang repeatedly traded company shares in his family members’ accounts on his work computer after attending board meetings that included discussions on confidential information, according to the SEC. He often made stock transactions the same day his brother traded Alliance shares, the agency said.
Chang didn’t identify one of the accounts as his wife’s after a market surveillance inquiry from the Financial Industry Regulatory Authority, according to the commission. He also attempted to hide his involvement with another account by pretending to be his brother and not clarifying in communications with T. Rowe Price that they were family members, the agency said. The brokerage firm wouldn’t lift a hold on the account unless its owner could confirm the Changs weren’t related, according to the SEC.
“Chang stated to the T. Rowe Price representative that a large percentage of Chinese people had the last name ‘Chang,’” the complaint said. “This response was evasive and misleading.”
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