SEC Charges Husband of Investment Banker with Insider Trading

Litigation Release No. 24375 / December 17, 2018

Securities and Exchange Commission v. Peter Cho, Case No. 1:18-cv-11811 (S.D.N.Y.)

The Securities and Exchange Commission today charged a New York-based banking consultant with insider trading in advance of an airline merger based on confidential information he learned by eavesdropping on the phone conversations of his then-fiancĩ, who was an investment banker working on the deal.

The SEC's complaint alleges that Peter Cho illegally bought Virgin America Inc. options prior to the April 4, 2016 public announcement that Alaska Air Group, Inc. would acquire Virgin. Cho learned of Alaska's efforts to purchase Virgin by listening to conversations of his now-wife, who worked on the deal from their shared apartment at night and on weekends. The two were engaged to be married at the time. Cho misappropriated this information and purchased aggressive call options betting that Virgin's stock price would rise quickly. In several instances, Cho was the only investor who purchased or held the series of options he traded, which included "out-of-the-money" options due to expire in a matter of weeks. By purchasing these aggressive options based on material non-public information, Cho was able to turn an initial investment of approximately $4,000 into profits of more than $250,000 in less than one month.

The SEC's complaint, filed in district court in Manhattan, charges Cho with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Without admitting or denying the allegations in the complaint, Cho has consented to the entry of a final judgment permanently enjoining him from violating the above-mentioned provisions of the federal securities laws, and ordering him to return $251,386 in illegal profits with prejudgment interest plus a one-time penalty of the same amount, for a total of $532,777. The settlement is subject to court approval.

The SEC's investigation was conducted by John P. Lucas, Martin Zerwitz and Deborah A. Tarasevich, with assistance from John Rymas of the Market Abuse Unit's Analysis and Detection Center. The investigation was supervised by Market Abuse Unit Chief Joseph G. Sansone. The SEC appreciates the assistance of FINRA, the U.S. Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation.