Business

Equifax Worker Charged With Insider Stock Trade

Posted June 28, 2018 5:52 p.m. EDT
Updated June 28, 2018 5:54 p.m. EDT

Regulators charged a second former Equifax employee with insider trading, accusing him on Thursday of placing a financial bet that the stock would decline after learning about the company’s huge data breach but before it was publicly disclosed.

The former employee, Sudhakar Reddy Bonthu, a software engineering manager, traded on the information he received while creating a website for consumers affected by the attack, according to a complaint filed by the Securities and Exchange Commission in federal court in Atlanta. Bonthu, 44, was told the project was being done for an unnamed client but figured out that Equifax itself was the victim, according to the complaint.

He then bought stock options that would gain value if Equifax’s shares declined, according to the SEC complaint.

Meg Strickler, Bonthu’s lawyer, said he was looking forward to having his case move through the criminal justice system, but declined further comment.

The data breach ultimately exposed the sensitive details of more than 140 million consumers, including Social Security numbers, driver’s license numbers and other information.

In March, the SEC accused another former Equifax employee, Jun Ying, who had been chief information officer in Equifax’s core U.S. consumer reporting division, of exercising all of his vested stock options and selling nearly $1 million in shares a little more than a week before Equifax announced the cyberattack.

According to the SEC, Bonthu bought so-called put options — giving him the right to sell Equifax shares at a certain price — after he figured out the company had been hacked. Less than a week later, Equifax publicly disclosed the breach, and its stock fell about 14 percent. Bonthu then sold the options, which had gained value as the stock declined, and made a $75,000 profit, the commission said.

“As we allege, Bonthu, who was entrusted with confidential information by his employer, misused that information to conclude that his company had suffered a massive data breach and then sought to illegally profit,” said Richard R. Best, director of the SEC’s Atlanta regional office.

The U.S. attorney’s office for the Northern District of Georgia filed parallel criminal charges against Bonthu.

The SEC said that Equifax fired Bonthu in March after he refused to cooperate with an internal investigation into whether he violated the company’s insider trading policy.

Equifax said in a statement that it was cooperating with regulators. “Upon learning of potential trading activity by Mr. Bonthu, we immediately launched a review of his trading activity and separated him from our company,” a spokeswoman said.