Former CEO Of Sunnyvale-Based Tech Company Pleads Guilty To Insider Trading In His Company’s Securities
Defendant Traded Before Negative Earnings Announcements and an Acquisition of the Company
SAN JOSE – The founder and former chief executive officer of a Sunnyvale-based fiber optics equipment maker, Peter C. Chang, pleaded guilty today to insider trading and tender offer fraud, announced Acting United States Attorney Alex G. Tse and Federal Bureau of Investigation Special Agent in Charge John F. Bennett. The Honorable Lucy H. Koh, United States District Judge, accepted Chang’s guilty plea earlier today.
Chang, 59, of Los Altos, Calif., was the President, Chief Executive Officer (CEO), and Chair of the Board of Directors of Alliance Fiber Optic Products, Inc. (AFOP), a manufacturer of fiber optic components based in Sunnyvale, Calif. AFOP is publicly traded on the NASDAQ. As part of his guilty plea, Chang admitted he used two brokerage accounts, held in the names of his brother and his wife, to purchase and sell AFOP stock. He further admitted that he had access to material nonpublic information about the company, and that his duty of confidentiality and company policies regarding insider trading prevented him from trading on the information.
Further, as part of his plea agreement, Chang admitted that on October 28, 2015, and February 18, 2016, he sold AFOP stock prior to two public announcements of the company’s earnings. The timing of these sales allowed Chang to avoid losses he would otherwise have incurred when the stock price dropped after the announcements. Chang further admitted that in March 2016, he purchased AFOP stock while he knew material nonpublic information about a potential acquisition of the company by a larger public company. The acquisition of AFOP was publicly announced on April 7, 2016.
Pursuant to today’s plea agreement, Chang pleaded guilty to all counts in a superseding information filed today charging Chang with three counts of securities fraud and insider trading, in violation of in violation of 15 U.S.C. §§ 78j(b) and 78ff and 17 C.F.R. §§ 240.10b-5 and 240.10b5-2, and one count of fraud in connection with a tender offer, in violation of 15 U.S.C. §§ 78n(e) and 78ff and 17 C.F.R. §§ 240.14e-3(a) and 240.14e-3(d).
Judge Koh scheduled Chang’s sentencing for May 30, 2018. Chang faces a maximum statutory penalty for securities fraud and fraud in connection with a tender offer of 20 years in prison and a fine of $5 million, per count. Additional fines, periods of supervised release, and restitution also may be ordered, however, any sentence will be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant U.S. Attorney Lloyd Farnham is prosecuting the case with the assistance of Jeremy Acala and Claudia Hyslop. The prosecution is the result of an investigation by the FBI. Additional assistance was provided by the San Francisco Regional Office of the Securities and Exchange Commission.