The U.S. Securities and Exchange Commission (SEC) has announced that it has charged a former Equifax manager with insider trading in advance of the company’s September 2017 announcement of a massive data breach that exposed Social Security numbers and other personal information of approximately 148 million U.S. customers.
This is the second case the SEC has filed arising from the Equifax data breach. In March, the former chief information officer of Equifax’s U.S. business unit was charged with insider trading.
In a complaint filed in federal court in Atlanta today, the SEC charged that Equifax software engineering manager Sudhakar Reddy Bonthu traded on confidential information he received while creating a website for consumers impacted by a data breach.
According to the complaint, Bonthu was told the work was being done for an unnamed potential client, but based on information he received, he concluded that Equifax itself was the victim of the breach. The SEC alleges that Bonthu violated company policy when he traded on the non-public information by purchasing Equifax put options. Less than a week later, after Equifax publicly announced the data breach and its stock declined nearly 14 percent, Bonthu sold the put options and netted more than $75,000, a return of more than 3,500 percent on his initial investment.
Bonthu, 44, was terminated from Equifax in March after refusing to cooperate with an internal investigation into whether he had violated the company’s insider trading policy.
“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. “Corporate insiders simply cannot abuse their access to sensitive information and illegally enrich themselves.”
In a parallel proceeding, the U.S. Attorney’s Office for the Northern District of Georgia filed criminal charges against Bonthu.
To settle the SEC’s civil charges, Bonthu has agreed to a permanent injunction and to return his allegedly ill-gotten gains plus interest. The settlement is subject to court approval.