ATLANTA - Sudhakar Reddy Bonthu, a former software
development manager for Equifax, was arraigned today on federal charges of
insider trading for allegedly using information entrusted to him to purchase
put options and turn a profit when the news of the data breach was made
public. A grand jury previously indicted
Jun Ying, a former chief information officer of Equifax U.S. Information
Solutions, on charges of insider trading relating to the data breach. Ying pleaded not guilty on March 15, 2018.
“Bonthu allegedly took advantage of his position to profit
while members of the public were unaware of the data breach at Equifax,” said
U.S. Attorney Byung J. “BJay” Pak. “The
integrity of the stock markets are jeopardized when greedy individuals who are
entrusted with nonpublic information use the knowledge for their benefit.”
“Company insiders must follow the same rules that govern
investors, otherwise their actions undermine the public’s confidence in the
nation’s stock markets,” said J. C. Hacker, Acting Special Agent in Charge of
FBI Atlanta. “To maintain a fair and equitable stock market for everyone, the
FBI will do everything in its power to hold those accountable who would choose
to take advantage of their inside knowledge.”
“As alleged in our complaint, Bonthu used confidential
information to determine that his company had suffered a massive data breach
and then illegally profited from it,” said Richard R. Best, Director of the
Securities and Exchange Commission’s Atlanta Regional Office. “Corporate employees cannot take advantage of
their access to sensitive information and unlawfully benefit from it.”
According to U.S. Attorney Pak, the charges, and other
information presented in court: Equifax Inc. is a consumer credit reporting
agency headquartered in Atlanta. During the summer of 2017, Equifax was the
victim of a data breach, where hackers acquired names, Social Security numbers,
birth dates, and addresses of over 145 million consumers.
Sudhakar Reddy Bonthu was a software development manager for
Equifax’s Global Consumer Services team in August 2017. In that role, he was entrusted with
information that allegedly resulted in him concluding that Equifax was the
victim of a data breach. On August 25,
2017, Bonthu and other Equifax employees were asked to assist in responding to
the breach, although he was not directly informed that Equifax had been
breached. On August 25, 2017, Bonthu was
informed that the target date for announcing the breach publicly was September
6, 2017. Around August 30, 2017, Bonthu
learned that approximately 100 million individuals’ information was exposed as
part of the breach and that the data included names and Social Security
numbers. The next day, Bonthu received
an email related to his work on the breach with a file attached named
“EFXDatabreach.postman_collection.”
“EFX” is the stock ticker symbol for Equifax.
On September 1, 2017, Bonthu bought 86 put options in
Equifax stock that expired on September 15, 2017. Those put options allowed him to profit if the
value of Equifax stock dropped within that two-week period. Equifax publicly
disclosed the data breach on September 7, 2017, and its stock fell the next
day. Bonthu then exercised his put
options, realizing a profit of more than $75,000.
Sudhakar Reddy Bonthu, 44, of Atlanta, Georgia was arraigned
on a criminal information before U.S. Magistrate Judge Alan J. Baverman, after
waiving his right to be indicted by a federal grand jury.
Members of the public are reminded that an information and
an indictment only contain charges. A
defendant is presumed innocent of the charges and it will be the government’s
burden to prove the defendant’s guilt beyond a reasonable doubt at trial.
This case is being investigated by the Federal Bureau of
Investigation, with assistance from the U.S. Securities and Exchange
Commission.
Christopher J. Huber, Deputy Chief of the Complex Frauds
Section, and Assistant U.S. Attorney Lynsey M. Barron are prosecuting the case.
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