Another Insider Guessing Case

The Securities and Exchange Commission and the DOJ filed another case against an Equifax employee who figured out that the breach remediation plan was actually for Equifax and not a client. Sudhakar Reddy Bonthu, like Jun Ying in the earlier case, Bonthu was working on Project Sparta which was identified as a fast-breaking opportunity for an unnamed potential client. Bonthu was tasked with developing the online user interface and tools.

The SEC makes a big jump, with little to back it up, that Bonthu knew or was reckless in not knowing that Project Sparta was actually for Equifax and that the company had suffered a massive data breach. The sole proof the SEC offered was that Bonthu received a dataset file entitled: “EFXDatabreach.postman_collection.”

It sounds to me like this case goes into the “insider guessing” bucket. According to the SEC, Bonthu had a matrix of information that lead him to conclude the true nature of his project. THe tough part will be the SEC convincing a jury.

In the earlier case The SEC against Jun Ying, a former senior technology executive at Equifax with insider trading, Ying exercised his stock options and sold his Equifax stock holdings ahead of Equifax’s announcement that it had suffered a major data breach.

Bonthu was more sophisticated. He bought put options with a September 15 expiration. Equifax announced the breach on September 7. He bought them in an account in his wife’s name instead of one with his name. Equifax had a policy that prohibited employees trading derivatives, including put options.

I think that trading looks works than Ying’s sale of his stock. So that may a jury less sympathetic if he is hoping for a result like the railroad workers.

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