Former CEO Peter C. Chang, 59, of Los Altos, California, has pleaded guilty to a calculated insider trading scheme that exploited his position at Sunnyvale-based Alliance Fiber Optic Products, Inc. (AFOP), a NASDAQ-traded manufacturer of fiber optic components. The guilty plea, entered today before U.S. District Judge Lucy H. Koh in San Jose, marks the collapse of a years-long fraud that allowed Chang to dodge losses and profit from confidential company information.
Chang, who served as President, CEO, and Chair of AFOP’s Board of Directors, admitted to using brokerage accounts held in the names of his brother and wife to secretly trade company stock. Despite being bound by confidentiality duties and internal policies prohibiting insider trading, Chang leveraged material nonpublic information to time his transactions—selling shares before two negative earnings announcements on October 28, 2015, and February 18, 2016, avoiding substantial financial losses when the stock price dropped.
The deceit deepened in March 2016, when Chang purchased AFOP stock while in possession of privileged knowledge about a potential acquisition by a larger public company. He held onto this information until the deal was publicly announced on April 7, 2016—timing his trades for maximum personal gain. The transactions, conducted through third-party accounts, were designed to conceal his involvement and bypass compliance systems.
Chang pleaded guilty to three counts of securities fraud and insider trading under 15 U.S.C. §§ 78j(b) and 78ff, and 17 C.F.R. §§ 240.10b-5 and 240.10b5-2, along with one count of fraud in connection with a tender offer under 15 U.S.C. §§ 78n(e) and 78ff, and 17 C.F.R. §§ 240.14e-3(a) and 240.14e-3(d). Each count carries a maximum penalty of 20 years in prison and a $5 million fine.
Sentencing is scheduled for May 30, 2018. While the statutory maximums loom, the actual sentence will be determined under the U.S. Sentencing Guidelines and 18 U.S.C. § 3553, which consider factors including restitution, supervised release, and fines. The court will weigh the full scope of Chang’s breach of trust as a corporate leader.
The prosecution, led by Assistant U.S. Attorney Lloyd Farnham with support from Jeremy Acala and Claudia Hyslop, follows a joint investigation by the FBI and the Securities and Exchange Commission’s San Francisco Regional Office. The case underscores federal resolve to pursue white-collar criminals who abuse executive power for illicit financial gain.
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Key Facts
- State: California
- Agency: DOJ USAO
- Category: Fraud & Financial Crimes
- Source: Official Source ↗
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