A former Equifax manager who tried to profit off the company’s horrendous 2017 data breach with a little insider trading will spend eight months on home confinement, forfeit his ill-gotten gains, and pay an additional $50,000 (£38,365) in fines.
Sudhakar Reddy Bonthu pleaded guilty in July to purchasing put options in Equifax stock ahead of the credit-reporting agency’s announcement of the data breach, which exposed the names, Social Security numbers, birth dates, and other sensitive information belonging to some 700,000 UK residents and 145 million US residents. The put options enabled Bonthu, a software development manager at the time, to profit quickly after Equifax’s stock depreciated in reaction to the news.
He was sentenced to home confinement on Monday and, in addition to fines, was forced to turn over the more than $75,000 (£57,548) he made.
Prosecutors found that Bonthu was not alerted to the breach at Equifax beforehand, but figured it out anyway after being tasked with developing an online interface for an unnamed company suffering from a data breach. He also received a file related to the breach marked “EFX,” the stock ticker symbol for Equifax.
Bonthu purchased 86 put options on 1 September 2017, which would allow him to profit considerably if the value of Equifax’s stock depreciated within two weeks. The company disclosed the breach publicly on 7 September.
In a statement, US Attorney Byung Pak said that Bonthu “took advantage of information entrusted to him in order to make a quick profit,” adding: “The integrity of the stock markets and the confidence of investors are impaired by those who use nonpublic information for personal gain.”
“If we don’t hold company insiders to the same rules that govern regular investors, the public’s confidence in the stock market erodes,” added Chris Hacker, Special Agent in Charge of FBI Atlanta.
Four Equifax executives were also found to have sold off company stock prior to the breach being announced. However, the company cleared them of wrongdoing in November, saying none of them had “knowledge of the incident when their trades were made” and that preclearance for the trades was “appropriately obtained.”