A U.S. court has sentenced an Atlanta based Indian techie to eight months’ home confinement and fined him $50,000 after he pleaded guilty to insider trading in Equifax, a consumer credit reporting agency, where he used classified information of the company to earn a profit of $75,000 unlawfully.
Other than the above sentence, Sudhakar Reddy Bonthu, aged 44, was ordered to forfeit $75,979 that he earned from the trading, said the statement by Department of Justice.
“Bonthu intentionally took advantage of information entrusted to him in order to make a quick profit,” said U.S. Attorney Byung J. “BJay” Pak.
“The integrity of the stock markets and the confidence of investors are impaired by those who use nonpublic information for personal gain,” he added.
Equifax had suffered a massive data breach in summer 2017, when hackers acquired names, Social Security numbers, birth dates, and addresses of over 145 million consumers. After this incident, the company created a team to develop data breach remediation applications.
Bonthu, a software product development manager in the company, was a member in this team. His job was to primarily develop an online user interface to allow consumers to determine whether they were impacted by the breach. He was not told that Equifax itself had suffered the breach, but he concluded this based on information provided. For example, “he knew that around 100 million individuals’ information was exposed as part of the breach and that the available information included names and Social Security numbers,” says the statement.
Explaining the reason of a tight deadline, Equifax told team members that an unnamed firm was going to declare the data breach publicly on Sept.6, 2017. During this time period, on Sept.1, last year Bonthu bought 86 “put” options in Equifax stock with an expiry on Sept.15, 2017. He aimed to earn huge profit, as “put” option allowed him to get profit if the value of this stock went down within two weeks.
When the company revealed the massive data breach on Sept.7 2017, the company’s share value dropped the next day. It was the time, when Bonthu exercised his “put” options to gain a whopping profit of $75,000. This practice comes under insider trading, which is an offence.
“These trades also violated company policy, which did not allow employees to purchase option contracts in Equifax common stock,” said the release.
“If we don’t hold company insiders to the same rules that govern regular investors, the public’s confidence in the stock market erodes,” said Chris Hacker, Special Agent in Charge of FBI Atlanta. “The FBI will do everything in its power to hold accountable those who choose to take advantage of their inside knowledge.”