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.
Sources:
- Former Equifax Manager Charged With Insider Trading
- SEC Complaint against Sudhakar Reddy Bonthu
- Is Insider Guessing Illegal? by Matt Levine
- Spotify Will Skip a Lot of IPO Essentials, Also insider guessing, … by Matt Levine
- Insider Guessing
- Former Equifax Executive Charged With Insider Trading
- Working on the Railroad is Not Insider Trading