Los Altos man is arrested on insider trading charges

SUNNYVALE » Federal authorities on Wednesday arrested the former head of a Sunnyvale tech firm on insider trading charges, according to the U.S. Department of Justice.

Peter C. Chang, 59, of Los Altos is charged with one count of securities fraud and one count of fraud in connection with a tender offer. If convicted, he could face up to 20 years in prison and a $5 million fine.

Chang founded Alliance Fiber Optic Products Inc. in 1995 and served as chairman of the board of directors, CEO and president until it was sold to New Yorkbased Corning Inc. in 2016.

A complaint unsealed after his arrest alleges Chang bought and sold stock based on data he obtained through his roles. Corporate policies and agreements, however, restricted his ability to trade securities and required him to keep certain information confidential.

Chang used brokerage accounts in the names of his wife and brother to buy and sell stock based on the confidential information, and in doing so, he avoided losses and made profits, according to the complaint.

For example, Chang learned revenues in the third quarter of 2015 would be lower than expected due to a drop in customer orders. The complaint alleges he sold 152,000 shares in advance of an earnings report and averted the loss of a half-million dollars.

Chang made many of his illicit trades while he was at work, according to the complaint.

The complaint alleges Chang also used his insider knowledge of Alliance Fiber Optic Products’ impending sale to Corning to buy and sell shares at a profit of more than $800,000.

That sum, however, was a fraction of the $30 million he stood to gain through the acquisition of stock and options he legitimately obtained, according to the complaint.

In a separate action, the United States Securities and Exchange Commission has filed civil charges against Chang, alleging he engaged in insider trading and failed to report stock transactions.