A reader points me to a story that apparently the Securities and Exchange Commission figured out that frequent flyer miles are code for insider trading, at least in the case of Igor Poteroba and Aleksey Koval.

Among the means of communication used to illegally tip and trade on the inside information were coded e-mail messages that referred to securities and money as “frequent flyer miles” and “potatoes.” ..

Poteroba: Keep me posted as to how * * * [m]any frequent flier miles you’ve got this far and how many you plan to get by Friday[.] Will be in Boston tomorrow[.] Plans for a trip look fine so far[.] Worst case we can get a refund by Monday, hopefully we do not[.]

Koval: As I mentioned, I just got into this frequent flyer program. I got five thousand of sign-in bonus miles but thinking maybe if I fly often, I will get additional three to five K miles.Poteroba: On the frequent flyer program topic you mentioned, I think you should sign up for another flight, if you can, since they are providing bonus mileage soon[.]

According to the SEC’s complaint, Koval wired $5,000 into a brokerage account of Vorobiev that had been inactive for nearly six months. Koval then bought 2,100 shares of Guilford stock in the account at a total cost of $4,983. Both monetary amounts are consistent with the amount of 5,000 “sign-in bonus miles” referred to in the coded e-mails. A few days later, Koval wired an additional $4,800 into Vorobiev’s account and purchased an additional 2,030 shares of Guilford stock at a cost of $4,780. The money transfer and subsequent stock purchases are consistent with Koval’s coded statement that he “will get additional three to five K miles.”

Be careful out there, the government is watching your bonus miles!